The average charge-off ratio among the nation’s four largest issuers increased 12 basis points (bps) quarter-to-quarter (QOQ) to 3.09% in the first quarter (Q1/15). The top 100 U.S. banks posted a 10 bps increase QOQ to 3.07%, according to CardData.
All four of the top issuers reported upticks in their charge-off rates QOQ but remain down significantly from Q1/14. Sequentially, Chase was up 15 bps; Bank of America (BofA) up 13 bps; Capital One (COF) up 16 bps; and Citibank (CITI) up 1 bps.
There are concerns that delinquency rates will slowly rise in 2015, producing larger charge-offs in the third and fourth quarters.
The Chase charge-off rate increased 15 bps sequentially, but down 9 bps from one-year ago. Chase posted a charge-off rate of 2.84% for Q1/15, compared to 2.69% in Q4/14, and 2.93% for Q1/14.
The BofA charge-off ratio increased 13 bps sequentially, but down 41 bps from one-year ago. BofA posted a charge-off rate of 2.84% for Q1/15, compared to 2.71% in Q4/14, and 3.25% for Q1/14.
The COF charge-off rate increased 16 bps sequentially, but down 46 bps from one-year ago. COF posted a charge-off rate of 3.55% for Q1/15, compared to 3.39% in Q4/14, and 4.01% for Q1/14.
The CITI charge-off ratio increased 1 bps sequentially, but down 31 bps from one-year ago. CITI posted a charge-off rate of 3.11% for Q1/15, compared to 3.10% in Q4/14, and 3.42% for Q1/14.
According to the Federal Reserve, the charge-off rate (not seasonally adjusted) for the top 100 U.S. banks increased in the fourth quarter by 10 bps sequentially, but down 34 bps from Q4/13. 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.
CardData estimates the Top 100 charge-off ratio to be 3.07% for the first quarter, compared to 2.97% in the prior quarter and 3.30% one-year ago.
RAM Research (ramresearch.com) projects the average charge-off rate among the Big 4 issuers will rise 10 bps in the second quarter to 3.17%.
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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