We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Banks' Credit Card Defaults Down Despite Coronavirus Scare
Read MoreHide Full Article
The rate of U.S. credit card defaults showed signs of improvement in May 2020 despite coronavirus-related economic slowdown. The improving trends in credit card portfolios of most banks have come at a time when index of U.S. consumer confidence rose marginally to 86.6 in May from 85.7 in the prior month.
Even several banks’ top executives noted that there has been a gradual rise in consumer spending in May from April 2020. Credit card loans are charged off after consumers are delinquent on numerous payments and a company determines that those loans won't be repaid.
Details
Bank of America’s (BAC - Free Report) charge-off rate declined to 2.50% in May from April’s 2.81%, while delinquencies improved to 1.46% from 1.55% in the prior month. Likewise, JPMorgan’s (JPM - Free Report) rate of losses on credit card loans reduced in May to 2.34% from 2.43% in April. Its delinquency rate fell 7 basis points (bps) from the prior month to 1.20%.
Synchrony Financial’s (SYF - Free Report) adjusted charge-off rate decreased to 5.10% in May from April’s 5.90%, while delinquencies improved to 3.60% from 4.10% in the prior month.
Other major credit card issuer, Capital One (COF - Free Report) also recorded a fall in both charge off and delinquency rates for the reported month. The company’s charge-off rate declined to 4.49% from 4.93% in April and delinquency rate fell 43 bps to 3.15%.
For Citigroup (C - Free Report) , the credit card charge-off rate was 3.12% in May, up from 2.96% in April 2020. However, the bank reported a decrease in the number of customers falling behind on payments. Its delinquency rate fell 10 bps sequentially to 1.59% in May 2020.
Similarly, American Express’ (AXP - Free Report) rate of charge-offs was 3.0% in May, up from 2.70% in the prior month. Nonetheless, the rate of delinquencies improved to 1.60% from 1.70% in April. Further, Discover Financial’s (DFS - Free Report) charge-off rate increased 9 bps sequentially to 4.07% in May, while delinquency rate dropped to 2.36 % in the reported month from 2.56% in April.
Our Take
With the economy gradually reopening, the chances of further increase in consumer spending are high. Despite these favorable developments, unemployment rates remain at historically high levels and the chances of faster economic recovery are dim.
So, don’t get fooled by these numbers. The actual impact is likely to be seen in the latter half of 2020, as customers reassess their financial position and many credit-card issuers stop offering forbearance.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Bigstock
Banks' Credit Card Defaults Down Despite Coronavirus Scare
The rate of U.S. credit card defaults showed signs of improvement in May 2020 despite coronavirus-related economic slowdown. The improving trends in credit card portfolios of most banks have come at a time when index of U.S. consumer confidence rose marginally to 86.6 in May from 85.7 in the prior month.
Even several banks’ top executives noted that there has been a gradual rise in consumer spending in May from April 2020. Credit card loans are charged off after consumers are delinquent on numerous payments and a company determines that those loans won't be repaid.
Details
Bank of America’s (BAC - Free Report) charge-off rate declined to 2.50% in May from April’s 2.81%, while delinquencies improved to 1.46% from 1.55% in the prior month. Likewise, JPMorgan’s (JPM - Free Report) rate of losses on credit card loans reduced in May to 2.34% from 2.43% in April. Its delinquency rate fell 7 basis points (bps) from the prior month to 1.20%.
Synchrony Financial’s (SYF - Free Report) adjusted charge-off rate decreased to 5.10% in May from April’s 5.90%, while delinquencies improved to 3.60% from 4.10% in the prior month.
Other major credit card issuer, Capital One (COF - Free Report) also recorded a fall in both charge off and delinquency rates for the reported month. The company’s charge-off rate declined to 4.49% from 4.93% in April and delinquency rate fell 43 bps to 3.15%.
For Citigroup (C - Free Report) , the credit card charge-off rate was 3.12% in May, up from 2.96% in April 2020. However, the bank reported a decrease in the number of customers falling behind on payments. Its delinquency rate fell 10 bps sequentially to 1.59% in May 2020.
Similarly, American Express’ (AXP - Free Report) rate of charge-offs was 3.0% in May, up from 2.70% in the prior month. Nonetheless, the rate of delinquencies improved to 1.60% from 1.70% in April. Further, Discover Financial’s (DFS - Free Report) charge-off rate increased 9 bps sequentially to 4.07% in May, while delinquency rate dropped to 2.36 % in the reported month from 2.56% in April.
Our Take
With the economy gradually reopening, the chances of further increase in consumer spending are high. Despite these favorable developments, unemployment rates remain at historically high levels and the chances of faster economic recovery are dim.
So, don’t get fooled by these numbers. The actual impact is likely to be seen in the latter half of 2020, as customers reassess their financial position and many credit-card issuers stop offering forbearance.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>