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.
The average U.S. 30+ day delinquency rate among the nation’s four largest issuers declined 11 basis points (bps) sequentially, to a record low of 1.96% for the first quarter, compared to 2.07% in the prior quarter and 2.16% one-year ago. The top 100 U.S. banks posted a 27 bps decline from 1Q/14.
Discover’s (DFS) financial performance will face downward pressure from a number of factors including increased competition, normalizing credit performance and heightened legal and compliance expenses this year. However, operating performance for DFS’ credit card Asset-Backed Securities (ABS) is likely to remain strong in 2015, despite a decline in net income last year.
Discover’s U.S. end-of-period (EOP) credit card loans grew 5.5% year-on-year (YOY) and continues to outpace the top Visa and MasterCard issuers. Since 2009, Discover has experienced sequential growth at a compound annual growth rate (CAGR) of 5.5%, exceeded only by Capital One among the top ten issuers.
Discover’s U.S. Purchase Dollar Volume (PDV) is growing 4.7% annually. slower than its peer group, however Discover is outpacing the top Visa and MasterCard in outstandings growth. RAM Research forecasts Q1/15 U.S. PDV will slightly exceed $27 billion.
While the Chase credit card portfolio has consistently posted robust purchase dollar volume (PDV), outstandings declined between 2009 and 2013, with a compound annual growth rate (CAGR) of -1.24%, according to CardData. However, Chase turned the corner last year with a 2.5% year-on-year (YOY) gain.
Given the uptick in bank credit card delinquency in the third and fourth quarters, it is likely charge-offs will start to climb upwards as early as the first quarter and will continue to march north for the rest of 2015.
The average U.S. 90+ day delinquency rate among the nation’s four largest issuers declined 12 basis points (bps) to 1.04% during 2014. The top 100 U.S. banks also posted a 13 bps decline last year to 1.08%.
The average charge-off ratio among the nation’s four largest issuers declined 37 basis points (bps) year-on-year (Y/Y) to 2.97% in the fourth quarter (Q4/14). The top 100 U.S. banks posted a 34 bps decline last year, also to 2.97%.
The average U.S. 30+ day delinquency rate among the nation’s four largest issuers declined 25 basis points (bps) to 2.07% during 2014. The top 100 U.S. banks also posted a 25 bps decline last year to 2.16%.
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.
Discover continues to outpace the top Visa and MasterCard issuers with solid growth in fourth quarter outstandings. However, Discover’s gross dollar volume (GDV) rose 4.4% to $33.2 billion, below the average for the Big 4 Visa and MasterCard issuers.