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December’s credit card metrics extended their long, gradual path to prepandemic level of delinquencies and net charge-offs, as seen in the table below. With pandemic-era fiscal relief programs largely over, more consumers have been falling behind on credit card payments.
At most credit card companies, both metrics worsened from November, but remain better than December 2019 levels. The notable exceptions are JPMorgan Chase (NYSE:JPM), which saw its net charge-off rate of 1.24% drop from 1.64%, and Synchrony Financial (NYSE:SYF), which saw its adjusted net charge-off rate slide to 3.4% from 3.7%.
One company, though, experienced a charge-off rate that exceeded its December 2019 level. Bread Financial (NYSE:BFH), formerly Alliance Data Systems, experienced a net charge-off rate of 6.7%, exceeding the December 2019 level of 6.10%.
Earlier this month, credit card stocks slid after Discover Financial (NYSE:DFS) said it expects 2023 full-year net charge-off rate to rise to 3.5%-3.9% vs. 1.82% reported in 2022.
Capital One Financial (NYSE:COF) is also expecting delinquencies and charge-offs to rise as it set aside more for bad debt in Q4. Its provision for credit losses rose to $2.42B, more than Wall Street expected, and higher than the $1.67B provision in took in Q3.
Odeon Capital analyst Dick Bove is cautious on COF. “Capital One (COF) moved aggressively and effectively to build its loan book in credit cards for the past two years,” he wrote in a note to clients.” The move was successful but now the company must deal with reversals in that and other loan portfolios. We would not add to positions at this time.”
| 2022 | 2019 | ||||||
| Company | Ticker | Type | December | November | October | 3-month average | December |
| Capital One | COF | delinquency | 3.43% | 3.32% | 3.17% | 3.31% | 3.93% |
| charge-off | 3.57% | 3.14% | 2.93% | 3.21% | 4.55% | ||
| American Express | NYSE:AXP | delinquency | 1.00% | 0.90% | 0.90% | 0.93% | 1.60% |
| charge-off | 1.20% | 1.00% | 0.90% | 1.03% | 2.50% | ||
| JPMorgan | JPM | delinquency | 0.76% | 0.73% | 0.73% | 0.74% | 1.17% |
| charge-off | 1.24% | 1.64% | 1.19% | 1.36% | 2.20% | ||
| Synchrony | SYF | delinquency | 3.70% | 3.60% | 3.40% | 3.57% | 4.60% |
| adjusted charge-off | 3.40% | 3.70% | 3.40% | 3.50% | 4.90% | ||
| Bread Financial | BFH | delinquency | 5.50% | 5.40% | 5.40% | 5.43% | 5.80% |
| charge-off | 6.70% | 6.10% | 6.10% | 6.30% | 6.10% | ||
| Citigroup | NYSE:C | delinquency | 1.01% | 0.98% | 0.90% | 0.96% | 1.56% |
| charge-off | 1.34% | 1.33% | 1.32% | 1.33% | 2.77% | ||
| Bank of America | NYSE:BAC | delinquency | 1.03% | 1.02% | 0.98% | 1.01% | 1.60% |
| charge-off | 1.43% | 1.33% | 1.38% | 1.38% | 2.54% | ||
| Avg. delinquency | 2.35% | 1.99% | 2.21% | 2.18% | 2.89% | ||
| Avg. charge-off | 2.70% | 2.61% | 2.46% | 2.59% | 3.65% | ||
Note that Discover Financial (DFS) doesn’t pull out monthly credit card metrics for the last month of each quarter. Its Q4 credit card delinquency rate rose to 2.53% from 2.11% in Q3 and its net charge-off rate increased to 2.37% from 1.92%.
SA contributor Komal Sarwar sees potential for pain at Capital One (COF) in coming quarters as economic uncertainty and interest rate increases could lead to a recession.
