Credit card data hints at U.S. consumer rebound

Credit cards are pictured in a wallet in Washington, February 21, 2010.

NEW YORK (Reuters) - Credit card delinquency rates improved at JPMorgan Chase & Co and a majority of others -- a sign the lenders still face hurdles in the wake of the deep recession.

The delinquency rates likely received a seasonal boost, but nonetheless signal the card issuers are less likely to have to write off bad loans in the future. Charge-offs are loans the companies do not expect to be repaid.

The data build on similar figures in January and December, suggesting U.S. consumers may be clawing out of the recession brought on by the 2008-2009 financial crisis.

"Clearly the delinquency trends are improving, and they have been for the last couple months. The question is, particularly in February, how much of it is a seasonal benefit," said Michael Taiano, analyst at Sandler O'Neill.

Consumers tend to use cash from tax returns or year-end bonuses to pay down credit card debt this time of year, reflected in lower delinquencies, the analyst noted. "It's hard to tease out now much of an impact that is," he added.

Capital One Financial Corp reported the sharpest drop in delinquency rates from January to February, while American Express Co's rate was unchanged and Citigroup's rate rose, according to regulatory filings on Monday.

Capital One and JPMorgan Chase reported lower charge-off rates, while the other four companies reported higher rates. Citigroup was alone in logging a sequential rise in both monthly delinquencies and charge-offs.

"Although the increase in net losses has leveled off somewhat in recent months, the absolute level of credit losses remains near the top end of the industry's historical range," Collins Stewart analyst Todd Hagerman wrote in a note.

Shares of the lenders were mixed, as details of a U.S. Senate plan to revamp financial regulation pressured the broader sector.

LOSSES PEAKED?

Lenders lifted credit card rates last summer, setting off an expected rise in charge-offs in January and February, analysts said. That trend could continue this month.

American Express, the largest U.S. credit card company by purchase volume, said in a filing it expects second-quarter write-offs to be lower than in the first quarter, and that level of first-quarter write-offs will be similar to that of the fourth quarter.

"Most of the companies have already suggested that losses probably have peaked, whether it was in the fourth quarter or the early part of the first quarter," Taiano said.

Capital One -- the third-largest U.S. issuer of Visa Inc branded credit cards and the fifth-largest issuer of MasterCards -- said accounts at least 30 days delinquent declined to 5.51 percent in February from 5.80 percent in January. Its annualized net charge-off rate fell to 10.19 percent from 10.41 percent.

JPMorgan, the top issuer of Visa-branded cards, said delinquencies dropped to 4.67 percent in February from 4.75 in January. Among the lenders, JPMorgan had the sharpest decline in charge-offs, at 9.21 percent last month, compared with a 10.91 percent the previous month.

The delinquency rate at American Express was unchanged at 3.6 percent, the lowest of the six companies reporting the performance of their credit card portfolios. Its charge-offs rose last month to 7.4 percent -- also the lowest level -- from 7.0 percent in January.

Citigroup said delinquencies rose to 5.94 percent from 5.75 percent, while charge-offs jumped by the sharpest margin of those reporting, to 11.29 percent from 9.8 percent.

Bank of America Corp, the largest U.S. bank, had the highest rates in both categories. But its delinquencies dropped for a third straight month, to 7.23 percent in February from 7.35 percent in January. Charge-offs rose to 13.51 percent from 13.25 percent.

Delinquencies at Discover Financial Services dropped to 5.50 percent last month from 5.55 percent in January. Its charge-off rate jumped to 9.11 percent from 8.58 percent.

Shares of Discover closed up 1.5 percent, Capital One added 0.2 percent, and Bank of America ended the day unchanged. Citigroup shares fell 2 percent, while American Express and JPMorgan each slipped nearly 0.2 percent.

(Reporting by Jonathan Spicer; Additional reporting by Brenton Cordeiro in Bangalore; Editing by John Wallace, Richard Chang and Steve Orlofsky)