There are growing concerns in the U.S. bank credit card market regarding the 2017 outlook for delinquencies and charge-offs. All the Top 4 issuers (Chase, Capital One, Bank of America and Citibank) reported slight upticks in the fourth quarter in both metrics. The Top 100 banks reported the seasonally adjusted (SA) credit card charge-off ratio for Q4 increased 33 bps sequentially, and up 46 bps YOY. The 30+ day delinquency rate, SA, among the top 100 U.S. banks for the fourth quarter increased 4 bps sequentially, and up 18 bps year-on-year.
Meanwhile the Federal Reserve reported the SA Financial Obligations Ratio (FOR) slipped downward to 15.40% in 4Q/16, compared to 15.41% in 3Q/16 and 15.40% in 4Q/15. The SA Debt Service Ration (DSR) decreased to 9.98% in the fourth quarter of this year, compared to 9.99%% in second quarter, and 9.99% one-year ago. Both ratios continue to hover at historic lows.
Based on the metrics cited above there is a consensus the uptick in delinquency and charge-offs may be driven by trouble in the sub-prime credit card market.
We will get a real sense of where 2017 is headed as the first quarter earnings reports come out late next week.