Credit card metrics climb closer to prepandemic levels in November (NYSE:COF)

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Credit card delinquencies and net charge-offs continued to creep up in November, extending the trend of credit normalization over the past couple of years.

While COVID-19 initially triggered a sharp drop in spending in the spring of 2020, the unprecedented fiscal support from government led to a surge in spending and gave consumers a financial cushion. That resulted in unusually strong credit quality. At the least, most consumers kept up with their credit card payments, and many were able to pay down account balances. Now the stimulus checks have stopped and consumers’ savings are dwindling.

“November card trends reflected ongoing credit normalization, as well as robust growth in receivables driven by consumer demand/inflation,” wrote Jefferies analyst John Hecht in a note to clients on Friday.

Loan balances rose 2.5% M/M to $443B, or 15.1% Y/Y, on increased demand for credit, according to his note. “Issuers have yet to tighten credit until they see further confirmation of consumer weakness,” he observed.

The average delinquency rate of eight card lenders rose to 2.29% in November, up from 2.21% in October and from 1.67% in November 2021, as seen in the table below. That’s still more than 100 basis points lower than the average delinquency of 3.61% in November 2019.

Net charge-offs are getting closer to their prepandemic level than delinquencies. The average net charge-off rate of 2.59% climbed from 2.42% in October and from 1.78% in the same month a year ago. The most recent month’s average was only 25 basis points better than the 2.84% posted in November 2019.

Bread Financial (NYSE:BFH), formerly Alliance Data Systems, is getting closer to prepandemic levels than its rivals. Its delinquency rate is only 50 bps better than its November 2019 level and its net-charge-off rate is only 20 basis points better.

Since Tuesday’s close, American Express (NYSE:AXP) shares fell 7.1%, Capital One Financial (NYSE:COF) -8.9%, Discover Financial (NYSE:DFS) -7.2%, Bread Financial (BFH) -3.1%, Synchrony Financial (NYSE:SYF) -6.3%.

“Certainly, the trend of credit loss normalization is showing through in the past several months, but [Thursday’s] pullback feels like an overreaction and we believe the weakness in COF and AXP provides an opportunity to add to positions,” said Baird analyst David George.

2022 2019
Company Ticker Type November October September 3-month average Change in bpsNov. 22/19
Capital One COF delinquency 3.32% 3.17% 2.97% 3.15% 3.91% -59
charge-off 3.14% 2.93% 2.23% 2.77% 4.43% -129
American Express AXP delinquency 0.90% 0.90% 0.90% 0.90% 1.60% -70
charge-off 1.00% 0.90% 0.80% 0.90% 2.40% -140
JPMorgan NYSE:JPM delinquency 0.73% 0.73% 0.69% 0.72% 1.17% -44
charge-off 1.64% 1.19% 1.15% 1.33% 2.20% -56
Synchrony SYF delinquency 3.60% 3.40% 3.30% 3.43% 4.60% -100
adjusted charge-off 3.70% 3.40% 3.00% 3.37% 4.90% -120
Discover DFS delinquency 2.36% 2.23% 2.11% 2.23% 2.61% -25
charge-off 2.46% 2.10% 2.01% 2.19% 3.46% -100
Bread Financial BFH delinquency 5.40% 5.40% 5.70% 5.50% 5.90% -50
charge-off 6.10% 6.10% 5.00% 5.73% 6.30% -20
Citigroup NYSE:C delinquency 0.98% 0.90% 0.85% 0.91% 1.58% -60
charge-off 1.33% 1.32% 1.12% 1.26% 2.57% -124
Bank of America NYSE:BAC delinquency 1.02% 0.98% 0.92% 0.97% 1.63% -61
charge-off 1.33% 1.38% 1.31% 1.34% 2.60% -127
Avg. delinquency 2.29% 2.21% 2.18% 2.23% 3.61% 132
Avg. charge-off 2.59% 2.42% 2.08% 2.36% 2.84% -25

SA contributor Avi Gilburt warns about Capital One Financial’s (COF) rising delinquencies and above-average exposure to subprime borrowers. Meanwhile, SA contributor Gary Gambino considers Synchrony Financial (SYF) as cheap even if loan losses increase.


Authore – Abhi bhardwaj

Hello friends, my Abhi Bhardwaj I am the owner of newsagent24.com and I am also a student. recently I just completed my graduation I am doing blogging since 2020 I love to write and always love exploring, and sharing knowledge with others that is why I started this blog basically this blog is related to us stock market, real estate, insurance, crypto, finance and tax if you have any qouri then please don't be shy

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