Consumer credit card losses, or charge-offs, among the Top 100 U.S. banks, are continuing to rise to levels for a second-quarter not seen since 2013. Meanwhile, delinquency, the precursor of charge-offs, is also hovering at six-year highs. The trends are concerning to card issuers as it adds more evidence the U.S. economy is headed into a downturn, or may already be unraveling.
Second-quarter card charge-offs among the Top 4 U.S. bank credit card declined slightly from the prior quarter, a historical pattern, but up double-digits from one-year ago, remaining the highest for a second-quarter in seven years. Credit card charge-offs among the nation’s Top 4 credit card issuers dipped 2 bps (basis points) sequentially in the second-quarter (2Q/19), and up 11 bps year-on-year (YOY).
Additionally, the Top 4 loan loss reserves for credit card or consumer banking increased 6.9% YOY in the second-quarter.
Top 100 Bank Credit Card Charge-Offs
Credit card charge-offs, seasonally adjusted (SA), among the top 100 U.S. banks for the second-quarter (2Q/19) edged up 3 basis points (bps) from the prior quarter, and up 6 bps year-on-year (YOY).
On a not seasonally adjusted basis (NSA), the charge-off rate among the top 100 U.S. banks for 2Q/19, edged down 4 bps from the prior quarter and up 6 bps YOY.
Compared to two years ago, the SA charge-off edged up 13 bps, and the NSA charge-off ratio is up 14 bps, based on calculations by CardData.
The top 100 U.S. banks posted a SA charge-off rate of 3.62% for 2Q/19, compared to 3.59% in 1Q/19, and 3.57% for 2Q/18. For 2Q/14 the SA charge-off rate stood at 3.31%.
On a NSA basis the top 100 U.S. banks posted a charge-off ratio of 3.74% for 2Q/19, compared to 3.78% in 1Q/19, and 3.68% for 2Q/18. For 2Q/14 the NSA charge-off rate stood at 3.44%, according to the Federal Reserve.
Top 100 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 second-quarter, is ominous concludes RAM Research.
In the macro, a change is looming and bankers knew it six months ago. The failure of the 2018 tax cuts to produce any meaningful impact on the economy, rising trade tariffs and other reckless American foreign and domestic policies are set to jack up U.S. consumer prices. The volatility on Wall Street and the slowing economies abroad collectively point to a global slowdown. Once consumer, business and investor confidence fades, so does the hope for stabilization, notes Robert McKinley, Senior Analyst of CardTrak, CardData and CardFlash.
Top 4 Issuer Credit Card Charge-Offs
The Top 4 (Chase [JPM], Capital One [COF], Bank of America [BAC], Citibank [C]) reported an aggregate charge-off ratio of 3.66% for 2Q/19, compared to 3.68% for 1Q/19 and 3.55% for 2Q/18. For the second-quarter of 2015 the Top 4 posted an average charge-off ratio of 2.98%.
Loan loss reserves for credit card or consumer banking increased 6.9% YOY. Chase boosted credit card loan loss reserves by 10% or $200 million from one-year ago, and Citibank loan loss reserves rose by 9%. Capital is the only major issuer reducing loan loss reserve for the second-quarter.
The U.S. consumer credit card charge-off ratio for Chase inched up by 1 bps YOY in the second-quarter from the prior quarter, but down 3 bps from 2Q/18. Chase reported a charge-off ratio of 3.24% for 2Q/19, compared to 3.23% for 1Q/19 and 3.27% for 2Q/18.
The Capital One U.S. consumer credit card charge-off ratio for 2Q/19 was down 18 bps from the prior quarter, but up 14 bps YOY. The issuer reported a charge-off ratio of 4.86% for 2Q/19, compared to 5.04% for 1Q/19 and 4.72% for 2Q/18.
Bank of America
The U.S. consumer credit card Bank of America charge-off ratio increased 8 bps the second-quarter from the prior quarter, and up 9 bps from 2Q/18. Bank of America reported a charge-off ratio of 3.26% for 2Q/19, compared to 3.18% for 1Q/19 and 3.17% for 2Q/18.
The Citibank North America (N.A.).consumer credit card charge-off ratio rose 2 bps in the second-quarter, compared to the prior quarter, and up 24 bps from 2Q/18. Citibank reported a charge-off ratio of 3.28% for 2Q/19, compared to 3.26% for 1Q/19 and 3.04% for 2Q/18.
Complete Second-Quarter Report on the Top 100 U.S. Bank Quarterly U.S. Credit Card Charge-Offs [2015-2019] Available for Immediate Download
Other Related Quarterly Payments Reports