* Default rates rise, but deterioration slows
* AmEx data suggest ability to pay bills improves
* AmEx shares rise close to 12 percent
By Juan Lagorio
NEW YORK, April 15 (Reuters) - U.S. credit card defaults rose in March to new record highs, as more Americans lost their jobs, but American Express Co (AXP.N) surprised investors with data suggesting the ability of cardholders to pay bills could be stabilizing, sending shares up across the industry.
AmEx, the largest U.S. charge card operator by sales volume, said its annualized net charge-off rate -- debts companies believe they will never be able to collect -- rose to 8.80 percent in March from 8.60 percent in February.
But the rate for loans at least 30 days delinquent -- an indicator of future defaults -- decreased to 5.1 percent from 5.3 percent, sending American Express shares up almost 12 percent to $20.62.
“That’s a good sign shorter term,” said Robert Lutts, president and chief investment officer of Cabot Money Management. “It’s anticipating better times ahead ... We may not be completely out of the woods, but certainly the data ... is encouraging.”
After calendar adjustments, Capital One Financial Corp (COF.N) said the U.S. card charge-off rate rose to 9.00 percent in March from 8.38 percent in February, but also reported its delinquency rate was unchanged at 5.07 percent. Its shares wiped out losses and ended up 1.46 percent.
JPMorgan analysts said “some positive signals did emerge” from the data, adding that account closures and other moves Capital One began implementing last year to minimize further losses have begun to pay back.
But they added ”further gains in unemployment and housing market pressures will delay a consumer recovery until 2010 at the earliest.
Elsewhere, in the industry, the news looked grimmer, with Citigroup Inc (C.N) -- one of the largest issuers of MasterCard cards -- disappointing investors as its default rate rose to 9.66 percent in March from 9.33 percent a month earlier, according to a report based on trusts representing a portion of securitized credit card debt.
JPMorgan Chase & Co (JPM.N) -- a big issuer of Visa cards -- reported its charge-off rate rose to 7.13 percent in March from 6.35 percent in February. Bank of America Corp’s (BAC.N) credit card losses increased to 9.20 percent from 9.10 percent in February.
Discover Financial Services (DFS.N), the fourth-largest U.S. credit card network, said its net loss rate increased to 7.39 percent from 7.15 percent.
“The question will be if the data coming next month and the month after is just a little bit more negative, or a lot more negative, and I‘m thinking it may be a little bit more negative,” said Lutts, suggesting investors are already pricing in the bad news and betting on a recovery by year end.
“It’s a change in investors’ psychology to go on the more favorable side,” he added.
U.S. unemployment -- currently at 8.5 percent -- is expected to approach 10 percent as the country endures its worst recession since World War Two and credit card losses would follow that way.
Moshe Orenbuch, an analyst at Credit Suisse, estimated credit card losses would rise to 10 percent by the end of 2009, adding losses should improve next year, but will likely average in the 9.0 percent range.
That could translate into credit losses of between $70 billion to $75 billion, according to analysts.
“I don’t expect things to get better anytime soon,” said Keith Davis, an analyst at Farr, Miller & Washington. “Higher unemployment is going to dramatically affect credit trends going forward.”
Credit card lenders are trying to protect themselves by tightening credit limits, rising standards, and closing accounts. They have also been slashing rewards, raising interest rates and increasing fees to cushion further losses. (Reporting by Juan Lagorio, additional reporting by Elinor Comlay, Editing by Andre Grenon)