Fourth-Quarter Chargeoffs Up a Tad as Reserves +9%

Fourth-quarter chargeoffs among the Top 4 U.S. bank credit card increased modestly from the prior quarter and up a smidgen from one-year ago. Credit card charge-offs among the nation’s Top 4 credit card issuers decreased 7 bps (basis points) sequentially in the fourth-quarter (4Q/19), and up 3 bps year-on-year (YOY).

The Top 4 (Chase [JPM], Capital One [COF], Bank of America [BAC], Citibank [C]) reported an aggregate charge-off ratio of 3.37% for 4Q/19, compared to 3.30% for 3Q/19 and 3.34% for 4Q/18. For the fourth-quarter of 2015 the Top 4 posted an average charge-off ratio of 3.12%, based on figures gathered by CardData and PYRPTS.

Loan loss reserves for credit card or consumer banking among the Top 4 increased 9.1% YOY. Chase boosted credit card loan loss reserves by 9.6% from one-year ago, and Citibank loan loss reserves rose by 11.5%. Capital One and Bank of America likewise boosted loan loss reserve for the fourth-quarter, according to analysis by RAM Research and CardWeb.

Fourth-Quarter Chargeoffs Analysis

Senior Analyst Robert McKinley notes the increase in loan-loss reserves tracks with the short-term credit card delinquency rates, now hovering at seven-year highs.

U.S. consumer spending remains healthy and jobs appear to strong but consumer confidence remains sideways, notes payments expert Professor Cardworthy. But there are concerns over a sharp uptick in revolving credit in the fourth quarter, and growing concerns of a possible epidemic. So far in 2019, the data show American have added $33 billion in revolving consumer credit, on par with the $30 billion annual gains in the past three years, but well below the $100+ billion party in 2016.

Chase U.S. Card Charge-Offs

The U.S. consumer credit card charge-off ratio for Chase increased by 6 bps YOY in the fourth-quarter from the prior quarter, and up 8 bps from 4Q/18. Chase reported a charge-off ratio of 3.01% for 4Q/19, compared to 2.95% for 3Q/19 and 2.93% for 4Q/18. For the fourth-quarter of 2015, Chase posted a 2.42% consumer credit card charge-off ratio.

Chase credit card loan loss reserves for U.S. credit cards increased 9.6% YOY for the fourth-quarter to $5683 million, compared to $5583 million in the prior quarter and $5184 million for 4Q/18.

Capital One U.S. Card Charge-Offs

The Capital One U.S. consumer credit card charge-off ratio for 4Q/19 soared 20 bps from the prior quarter, and down 32 bps YOY. The issuer reported a charge-off ratio of 4.32% for 4Q/19, compared to 4.12% for 3Q/19 and 4.64% for 4Q/18. For the fourth-quarter of 2015, Capital One reported a U.S. credit card charge-off ratio of 3.75%.

Capital One’s credit card loan loss reserves for U.S. credit cards increased 9.5% YOY for the fourth-quarter to $1346 million, compared to $1010 million in the prior quarter and $1229 million for 4Q/18.

Bank of America U.S. Card Charge-Offs

The U.S. consumer credit card Bank of America charge-off ratio edged-up 2 bps the fourth-quarter from the prior quarter, and up 11 bps from 4Q/18. Bank of America reported a charge-off ratio of 3.03% for 4Q/19, compared to 3.01% for 3Q/19 and 2.90% for 4Q/18. For the fourth-quarter of 2015, Bank of America posted 2.52% consumer credit card charge-off ratio.

Bank of America’s total consumer banking loan loss reserves increased 2.1% YOY for the fourth-quarter to $934 million, compared to $927 million in the prior quarter and $925 million for 4Q/18.

Citibank U.S. Card Charge-Offs

The Citibank North America (N.A.).consumer credit card charge-off ratio declined 2 bps in the fourth-quarter, compared to the prior quarter, and up 20 bps from 4Q/18. Citibank reported a charge-off ratio of 3.10% for 4Q/19, compared to 3.12% for 3Q/19 and 2.90% for 4Q/18. For the fourth-quarter of 2015, Citibank posted 2.79% consumer credit card charge-off ratio.

Citibank’s North America consumer banking loan loss reserves increased 11.5% YOY for the fourth-quarter to $1522 million, compared to $1517 million in the prior quarter and $1365 million for 3Q/18.

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