Given the uptick in bank credit card delinquency in the third and fourth quarters, it is likely charge-offs will start to climb upwards as early as the first quarter and will continue to march north for the rest of 2015.
RAM Research forecasts first quarter charge-offs among the Top 4 issuers will come in at 3.07%. Credit card charge-offs among the Top 100 banks will likely compute to 3.06% in Q1/15.
The average charge-off ratio among the nation’s four largest issuers declined 37 basis points (bps) year-on-year (Y/Y) to 2.97% in the fourth quarter (Q4/14). The top 100 U.S. banks posted a 34 bps decline last year, also to 2.97%.
All four of the top issuers reported significant downticks in their charge-off rates Y/Y in the fourth quarter: Chase down 17 bps; Bank of America (BofA) down 48 bps; Capital One (COF) down 50 bps; and Citibank (CITI) down 32 bps.
However, sequentially charge-offs for two of the issuers declined and the other two increased: Chase up 17 bps; Bank of America (BofA) down 8 bps; Capital One (COF) up 56 bps; and Citibank (CITI) down 6 bps.
The average charge-off ratio for the top 100 U.S. banks rose 10 bps between the third and fourth quarters of 2014.
Due to seasonality, all the ratios will likely rise in the first quarter. Furthermore, there are concerns that delinquency rates will rise in 2015, producing larger charge-offs.
The Chase charge-off rate increased 17 bps sequentially, but down 17 bps from one-year ago. Chase posted a charge-off rate of 12.69% for Q4/14, compared to 2.52% in Q3/14, and 2.86% for Q4/13.
The BofA charge-off rate decreased 8 bps sequentially and down 48 bps from one-year ago. BofA posted a charge-off rate of 2.71% for Q4/14, compared to 2.79% in Q3/14, and 3.19% for Q4/13.
The COF charge-off rate increased 50 bps sequentially, but down 56 bps from one-year ago. COF posted a charge-off rate of 3.39% for Q4/14, compared to 2.83% in Q3/14, and 3.89% for Q4/13.
The CITI charge-off rate decreased 6 bps sequentially and down 32 bps from one-year ago. CITI posted a charge-off rate of 3.10% for Q4/14, compared to 3.16% in Q3/14, and 3.42% for Q4/13.
According to the Federal Reserve, the charge-off rate (not seasonally adjusted) for the top 100 U.S. banks increased 10 bps sequentially, but down 34 bps from one-year ago. The top 100 U.S. banks posted a charge-off rate of 2.97% for Q4/14, compared to 2.87% in Q3/14, and 3.31% for Q4/13.
For more data on Big 4 Bank Credit Card Charge-Offs access CardData®. For information and commentary on Big 4 Bank Credit Card Charge-Offs visit the searchable CardFlash® Library of more than 58,000 articles published since 1995. RAM Research® forecasts on Big 4 Bank Credit Card Charge-Offs are available exclusively through CardWeb.com.®
CHASE: Period-end credit card loans included loans held-for-sale of $304 million, $326 million and $310 million at March 31, 2014, December 31, 2013 and September 30, 2013, respectively. These amounts are excluded when calculating delinquency rates and the allowance for loan losses to period-end loans. There were no loans held-for-sale at June 30, 2013 and March 31, 2013.
BANK OF AMERICA: In addition to the U.S. credit card portfolio in the Consumer & Business Banking segment, the remaining U.S. credit card portfolio is reported in the Global Wealth Management segment.
CAPITAL ONE: The transfer of the Best Buy Stores, L.P. (“Best Buy”) portfolio to held for sale resulted in an increase in the average yield for Domestic Card and Total Credit Card of 121 basis points and 110 basis points, respectively, in Q3 2013, 168 basis points and 152 basis points, respectively, in Q2 2013 and 107 basis points and 97 basis points, respectively, in Q1 2013. The sale of the Best Buy portfolio was completed on September 6, 2013.
CITIBANK: Under U.S. GAAP, historical balance sheet information is not restated to reflect discontinued operations. Since the numerator portion of the ratio calculation excludes the income statement items under U.S. GAAP, related to the Credicard discontinued operations, the averages used in the ratio calculations have been adjusted to exclude the Credicard discontinued operations. Includes the impact of adding approximately 13 million credit card accounts and $7 billion of loans related to the previously announced acquisition of Best Buy’s U.S. credit card portfolio in the third quarter of 2013