Consumer Payment Card News

U.S. Credit Card Losses for Top 100 Hit a 7-Yr Q3 High

Credit Card Losses

Consumer credit card losses, or charge-offs, among the Top 100 U.S. banks, are continuing to rise to levels for a third-quarter not seen since early 2013. Meanwhile, delinquency, the precursor of charge-offs, is also hovering at seven-year highs. The trends are concerning to card issuers as it adds more evidence the U.S. economy is headed into a downturn in 2020, or already unraveling.

Third-quarter card charge-offs among the Top 4 U.S. bank credit card declined sharply from the prior quarter, a historical pattern, but up slightly from one-year ago, remaining the highest for a third-quarter in seven years. Credit card charge-offs among the nation’s Top 4 credit card issuers decreased 36 bps (basis points) sequentially in the third-quarter (3Q/19), and up 3 bps year-on-year (YOY).

Additionally, loan loss reserves for credit card or consumer banking among the Top 4 increased 9.9% YOY. Chase boosted credit card loan loss reserves by 10.9% or $549 million from one-year ago, and Citibank loan loss reserves rose by 12.1%. Capital One and Bank of America likewise boosted loan loss reserve for the third-quarter, according to analysis by RAM Research.

Top 100 Bank Credit Card Charge-Offs

Credit card charge-offs, seasonally adjusted (SA), among the top 100 U.S. banks for the third-quarter (3Q/19) edged up 4 basis points (bps) from the prior quarter, and up 15 bps year-on-year (YOY).

On a not seasonally adjusted basis (NSA), the charge-off rate among the top 100 U.S. banks for 3Q/19, soared 29 bps from the prior quarter and up 6 bps YOY.

Compared to two years ago, the SA charge-off edged up 23 bps, and the NSA charge-off ratio is up 15 bps, based on calculations by CardData.

The top 100 U.S. banks posted a SA charge-off rate of 3.70% for 3Q/19, compared to a revised 3.66% in 2Q/19, and a revised 3.55% for 3Q/18. For 3Q/14 the SA charge-off rate stood at 3.09%.

On a NSA basis the top 100 U.S. banks posted a charge-off ratio of 3.45% for 3Q/19, compared to a revised 3.74% in 2Q/19, and a revised 3.39% for 3Q/18. For 3Q/14 the NSA charge-off rate stood at 2.87%, according to the Federal Reserve.

Top 100 Bank Credit Card Charge-Offs Outlook

After the “Great Recession” the aggressive stimuli provided by the government to the financial community has led to the longest running economic recovery. The credit card charge-off ratio declined from a peak of 10.63% in 2009 to less than 3.00% in early 2015. The availability of consumer credit especially among consumer with sub-par credit scores, coupled with the recent piling of consumer credit in the broad market, during the first two quarters, is ominous and mirrors consumer behavior immediately prior the last recession, according to RAM Research analysis.

Furthermore, the current move to use alternative credit scoring (based on cash flow as opposed to payment history) for consumer and small business loans and mortgages is also raising concerns for the next recession, like 2007-2009, could produce an unprecedented consumer credit crunch, similar to the fourth-quarter of 2008 through 2009.

U.S. Economic Consumer Forecast

In the macro, a major change is looming and bankers could see the storm clouds in late 2018. Unemployment figures are already ticking up and consumer confidence is shattering. While holiday spending forecasts by retailers is projected to rise 4% YOY, the real figure, however, adjusting for a high return rate of purchases, may likely be less than 3% YOY.

For Wall Street, the on-again off-again tariff war, weakening European and Asian economies, domestic manufacturing contraction, artificially low borrowing rates, corporate cash glut, overnight funding issues, irrational exuberance by traders, the lack of coherent foreign and domestic policies, and most importantly, building consumer pessimism spell big trouble for 2020 and beyond, notes Robert McKinley, Senior Analyst of CardTrak, CardData and CardFlash.

Chase U.S. Card Charge-Offs

The U.S. consumer credit card charge-off ratio for Chase declined by 29 bps YOY in the third-quarter from the prior quarter, but up 4 bps from 3Q/18. Chase reported a charge-off ratio of 2.95% for 3Q/19, compared to 3.24% for 2Q/19 and 2.91% for 3Q/18. For the third-quarter of 2015, Chase posted a 2.41% consumer credit card charge-off ratio.

Chase credit card loan loss reserves for U.S. credit cards increased 10.9% YOY for the third-quarter to $5583 million, compared to $5383 million in the prior quarter and $5034 million for 3Q/18.

Capital One U.S. Card Charge-Offs

The Capital One U.S. consumer credit card charge-off ratio for 3Q/19 collapsed 74 bps from the prior quarter, and down 23 bps YOY. The issuer reported a charge-off ratio of 4.12% for 3Q/19, compared to 4.86% for 2Q/19 and 4.35% for 3Q/18. For the third-quarter of 2015, Capital One reported a U.S. credit card charge-off ratio of 2.46%.

Capital One’s credit card loan loss reserves for U.S. credit cards increased 6.3% YOY for the third-quarter to $1010 million, compared to $1024 million in the prior quarter and $950 million for 3Q/18.

Bank of America U.S. Card Charge-Offs

The U.S. consumer credit card Bank of America charge-off ratio decreased 25 bps the third-quarter from the prior quarter, and up 9 bps from 3Q/18. Bank of America reported a charge-off ratio of 3.01% for 3Q/19, compared to 3.26% for 2Q/19 and 2.92% for 3Q/18. For the third-quarter of 2015, Bank of America posted 2.46% consumer credit card charge-off ratio.

Bank of America’s consumer banking loan loss reserves increased 4.3% YOY for the third-quarter to $917 million, compared to $947 million in the prior quarter and $879 million for 3Q/18.

Citibank U.S. Card Charge-Offs

The Citibank North America (N.A.).consumer credit card charge-off ratio declined 16 bps in the third-quarter, compared to the prior quarter, and up 21 bps from 3Q/18. Citibank reported a charge-off ratio of 3.12% for 3Q/19, compared to 3.28% for 2Q/19 and 2.91% for 3Q/18. For the third-quarter of 2015, Citibank posted 2.75% consumer credit card charge-off ratio.

Citibank’s North America consumer banking loan loss reserves increased 12.1% YOY for the third-quarter to $1533 million, compared to $1522 million in the prior quarter and $1368 million for 3Q/18.

Full Report

Complete Third-Quarter Report on the Top 100 U.S. Bank Quarterly U.S. Credit Card Charge-Offs [2015-2019] Available for Immediate Download

Click Here

Other Related Quarterly Payments Reports

Top 100 U.S. Credit Card 30+ Delinquency

Top 4 U.S. Credit Card 30+ Day Delinquency

Top 4 U.S. Credit Card Charge-Offs

83 Total Quarterly Reports Available

SOURCES: Chase; Bank of America; Capital One; Citibank; Federal Reserve; RAM Research; CardData; CardTrak; CardFlash; Bankcenter; CardBuzz; PYVNTS; PYRPTS; Ruebud Media; Red 3 Media; The Cardworthy Company; Robear’s List