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Card Issuers' Charge-Offs, Delinquency a Mixed Bag in October
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The rate of U.S. card defaults was mixed in October for major credit card issuers amid the coronavirus-induced economic slowdown. Credit card loans are charged off after consumers are delinquent on numerous payments and a bank determines that the loans won't get repaid.
Details
Bank of America’s (BAC - Free Report) charge-off rate rose to 2.00% in October from September’s 1.94%, while delinquencies were 1.36%, up from 1.20%.
Also, JPMorgan’s (JPM - Free Report) delinquency rate deteriorated to 1.00% from the prior month’s 0.98%. However, its rate of losses on credit card loans fell 3 basis points (bps) in October to 1.89%. Likewise, Citigroup’s (C - Free Report) credit card charge-off rate decreased to 2.03% from 2.55% in September. Nonetheless, its delinquency rate ticked 1 bp up from the prior month to 1.38%.
On the contrary, another major credit card issuer, Capital One (COF - Free Report) recorded a fall in both charge off and delinquency rates in the reported month. The company’s charge-off rate declined to 3.11% from 3.35% in September and delinquency rate fell 3 bps to 2.19%.
Further, Synchrony Financial’s (SYF - Free Report) adjusted charge-off rate decreased to 3.30% in October from September’s 4.10%, while core delinquencies rose to 2.80% from 2.70%.
American Express’ (AXP - Free Report) rate of charge-offs were 2.20% in October, up 20 bps from the prior-month level. Its rate of delinquencies of 1.10% was unchanged sequentially. Further, Discover Financial’s (DFS - Free Report) delinquency rate increased to 1.99% in the reported month from 1.91% in September, while its charge-off rate fell 10 bps to 2.90%.
Conclusion
Though the economy is gradually recovering, there is no chance that it will go back to pre-crisis level anytime soon. Further, talks related to another stimulus package was almost stopped and unemployment rates remain at high levels.
Therefore, card issuers are likely to witness a rise in charge-offs and delinquency rates as the payment deferral program gradually winds down. The actual impact of economic slowdown is likely to be seen in early 2021, as customers reassess their financial position and many credit card issuers stop offering forbearance.
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Card Issuers' Charge-Offs, Delinquency a Mixed Bag in October
The rate of U.S. card defaults was mixed in October for major credit card issuers amid the coronavirus-induced economic slowdown. Credit card loans are charged off after consumers are delinquent on numerous payments and a bank determines that the loans won't get repaid.
Details
Bank of America’s (BAC - Free Report) charge-off rate rose to 2.00% in October from September’s 1.94%, while delinquencies were 1.36%, up from 1.20%.
Also, JPMorgan’s (JPM - Free Report) delinquency rate deteriorated to 1.00% from the prior month’s 0.98%. However, its rate of losses on credit card loans fell 3 basis points (bps) in October to 1.89%. Likewise, Citigroup’s (C - Free Report) credit card charge-off rate decreased to 2.03% from 2.55% in September. Nonetheless, its delinquency rate ticked 1 bp up from the prior month to 1.38%.
On the contrary, another major credit card issuer, Capital One (COF - Free Report) recorded a fall in both charge off and delinquency rates in the reported month. The company’s charge-off rate declined to 3.11% from 3.35% in September and delinquency rate fell 3 bps to 2.19%.
Further, Synchrony Financial’s (SYF - Free Report) adjusted charge-off rate decreased to 3.30% in October from September’s 4.10%, while core delinquencies rose to 2.80% from 2.70%.
American Express’ (AXP - Free Report) rate of charge-offs were 2.20% in October, up 20 bps from the prior-month level. Its rate of delinquencies of 1.10% was unchanged sequentially. Further, Discover Financial’s (DFS - Free Report) delinquency rate increased to 1.99% in the reported month from 1.91% in September, while its charge-off rate fell 10 bps to 2.90%.
Conclusion
Though the economy is gradually recovering, there is no chance that it will go back to pre-crisis level anytime soon. Further, talks related to another stimulus package was almost stopped and unemployment rates remain at high levels.
Therefore, card issuers are likely to witness a rise in charge-offs and delinquency rates as the payment deferral program gradually winds down. The actual impact of economic slowdown is likely to be seen in early 2021, as customers reassess their financial position and many credit card issuers stop offering forbearance.
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Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
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