UPDATE: Loan Write-Offs Edge Up For Some Card Issuers But Outlook Remains Strong

American Express Co. (AXP), Bank of America Corp. (BAC) and other large credit-card lenders saw their borrowers' payment habits improve again in March, though loan write-offs edged up for some issuers.

Delinquencies, or the percentage of borrowers late on their loan payments, continue to drop for the country's largest issuers of plastic, despite expectations that credit performance will turn lower this year as some lenders relax their requirements in pursuit of loan-balance growth.

"March proved to be a good month for the credit card issuers," Sanjay Sakhrani, an analyst with Keefe, Bruyette & Woods, wrote in a research note Monday. The continued decline in delinquencies "should potentially be a positive for future charge-off rates."

The ongoing improvements are likely to embolden some lenders already contemplating loosening their underwriting standards, which tightened dramatically when the recession hit as a wave of borrower defaults caused expenses to surge.

Moody's Investors Service said last week that "credit tightening has ended," though "lending standards for new originations still remain relatively high."

American Express, the largest credit-card issuer by spending, reported in a filing with the Securities and Exchange Commission Monday its delinquency rate for U.S. card loans fell to 1.3% in March from 1.4% in February. Its net charge-off rate, or percentage of loans deemed uncollectible, was flat at 2.4%.

With the March figures, American Express has now reported a quarter's worth of data for the year. Based on preliminary figures, the company's delinquency rate for the first quarter is 1.3%, down from 1.8% a year earlier. Its quarterly net charge-off rate is 2.3%, down from 3.7% a year earlier.

American Express is scheduled to report first-quarter results after the market close Wednesday.

Bank of America also saw its March performance improve. The Charlotte, N.C., bank, which reported monthly figures for securitized loans and not its overall card portfolio, said its delinquency rate fell to 3.6% from 3.75% in February. Its net charge-off rate also fell, to 5.48% from 5.56%.

Citigroup Inc. (C) reported declines in both metrics Monday for the first quarter, while Discover Financial Services (DFS), which reported March results last week, saw both numbers drop for the month.

But Capital One Financial Corp. (COF) and J.P. Morgan Chase & Co. (JPM) saw net charge-offs edge up slightly.

Capital One said its net charge-off rate was 3.85% in March, up from 3.84% in February. Delinquencies were down to 3.25% from 3.62%. Some analysts have voiced concerns about the McLean, Va., lender's prospects this year in light of its recent acquisition of HSBC Holdings PLC's (HBC) U.S. credit-card business, which includes subprime and several store-card portfolios, which tend to perform worse than general-purpose credit cards.

Moody's said it expects Capital One, which reports quarterly results after the market close Thursday, to be the "worst performer" of the six largest credit-card issuers this year when it comes to charge-offs, due mainly to its HSBC acquisition. It expects Capital One's net charge-off rate will average about 5.7% this year.

J.P. Morgan Chase on Friday reported first-quarter results showing its net charge-off rate increased to 4.4% from 4.29% in the fourth quarter but down from 6.97% a year earlier. Its quarterly delinquency rate for credit cards fell to 2.56% from 2.81% in the fourth quarter and 3.57% a year earlier.

Executives for the New York bank, which has been targeting affluent customers with new card products, have said they expect some of the benefits they have enjoyed from releasing funding reserves set aside to cover bad loans to dissipate this year.

Reserve releases have bolstered the earnings of credit-card lenders over the past year. But if those disappear, lenders will have to look for places to cut expenses to maintain earnings performance.

Some credit-card issuers have pulled back on direct-mail marketing in recent months, according to Mintel Comperemedia, a market research firm.

Card lenders mailed 282 million offers to U.S. consumers in February, up 6% from January but down 25% from a year earlier.

"Some issuers are cooling off following a sustained period of aggressive growth," Andrew Davidson, senior vice president with Mintel, said in an email.

-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214; [e-mail]