The average charge-off rate among the top four U.S. Visa and MasterCard issuers jumped 15 basis points (bps) in the fourth quarter after plunging to record lows most of 2014. Capital One (COF) Q/4 charge-offs soared 56 bps sequentially.
Three of the top four U.S. Visa and MasterCard issuers are seeing a continuing credit quality reversal in 2014 as delinquency rates headed higher in the fourth quarter. Bank of America (BofA) posted a five basis points (bps) downtick in Q4 but it is insignificant as their 90+ delinquency rate headed higher.
Bank of America (BofA) reported a decline of 0.8% in Year-on-Year (Y/Y) average U.S. bank credit card outstandings of $88.4 billion for the fourth quarter (Q4/14). Meanwhile, Purchase Dollar Volume (PDV) for BofA’s U.S. bank credit cards rose 2.6% Y/Y and up 3.9% Quarter-to-Quarter (Q/Q) to $69.2 billion
After completing a four-month nationwide rollout of its Preferred Rewards program in October, Bank of America launched a major advertising campaign this week to round up more enrollees.
The decline in the U.S. bank credit card charge-off ratio will likely bottom in the fourth quarter, dipping below the 3.00% mark for the first time since the first quarter 1995, but then heading higher throughout 2015. On a weighted basis charge-offs should come in around 3.01%, while the unweighted ratio should slide to 2.96% for the fourth quarter.
While the annual rate of increase in U.S. revolving credit has been slowing during all of 2014, there was a slight uptick in November. Consumer revolving credit expanded by $500 million in November, representing a 7.5% annual increase.
While U.S. credit card outstanding, among the top 4 issuers, were flat year-on-year (Y/Y) in the third quarter, it is likely to grow 2% Y/Y in the fourth quarter (Q4/14) and for all of 2015. Driving the growth is Capital One while Bank of America is hampering the peer group growth.
The decline in the U.S. bank credit card delinquency ratio will likely remain flat in the fourth quarter and then reverse course for all of 2015. On a weighted basis 30+ day delinquency will should come in around 2.29%, while the unweighted ratio should edge up slightly to 2.17% for the fourth quarter.
Bank credit card charge-offs, among the Top 100 U.S. banks, continue to decline in the third quarter to 3.01%. The ratio is the lowest since the third quarter of 1985. The ratio is down 31 basis points (bps) from one year ago, down 87 bps from two years ago and down a stunning 736 bps from five years ago.
Bank credit card delinquency among the Top 100 U.S. banks continue to decline in the third quarter to 2.16%. The ratio is the lowest in more than 25 years, down 26 basis points (bps) from one year ago, down 65 bps from two years ago and down a stunning 447 bps from five years ago.
Charge-offs among the nation’s top six credit card issuers will likely drop to 2.33% in the fourth quarter, but will likely inch up in the first quarter as delinquency ramps up. The fourth and first quarter are somewhat skewed due to the seasonality denominator.
Among the top six U.S. credit card issuers, the average 30+day delinquency rate is likely to top 2.00% in the fourth quarter, reversing a four year downward trend. The average 30+day delinquency rate was 1.93%, compared to 1.83% in the second quarter, and compared to 2.12% in the year-ago quarter, according to CardData..