* Bank of America credit card defaults fall to 14.25 pct
* American Express credit card chargeoffs down to 8.4 pct
* Most credit card companies report higher delinquencies
* Analysts see defaults at record highs in coming months (Recasts; adds Citigroup data, comments from Citigroup CEO, analyst comments; updates stock prices)
By Juan Lagorio
NEW YORK, Oct 15 (Reuters) - Most of the largest U.S. credit card companies reported defaults fell in September as consumers used tax refunds and other economic stimulus proceeds to lower debts, but late payments rose, suggesting more troubles ahead in an already battered industry.
The decline in defaults from record highs last month reflected a contraction earlier this year of late payments.
But delinquencies, an indicator of future credit losses, resumed an upward trend in August in some companies and climbed more than expected in September, signaling bad loans will rise in coming months and will peak later than anticipated.
Credit card chargeoffs -- loans the companies do not expect to be repaid -- usually track unemployment, which rose to a 26-year high of 9.8 percent in September. The jobless rate is expected to top 10 percent by year-end.
“We continue to expect delinquencies to rise this year and next year. We have seen some improvement over the summer, which was driven in our view by some seasonal factors,” said Jason Arnold, an analyst at RBC Capital Markets. “Chargeoffs in general will continue to rise in coming months.”
American Express Co AXP.N, the biggest U.S. credit card company by purchasing volume, said its chargeoff rate fell to 8.4 percent in September from 9.0 percent in August.
Bank of America Corp BAC.N, the largest U.S. bank, said its rate fell to 14.25 percent from 14.54 percent.
Citigroup Inc C.N, the biggest issuer of MasterCard-branded credit cards, posted the deepest decline as defaults fell to 10.15 percent from 12.14 percent.
Bank of America still has the biggest credit card default rates, and Citigroup, which reported a quarterly per-share loss on Thursday, said consumer credit remains the biggest drag on its results.
“The consumer credit environment remains challenging in the United States,” Citigroup Chief Executive Vikram Pandit said in a conference call with analysts.
JPMorgan Chase & Co JPM.N, the largest issuer of Visa-branded credit cards, said its chargeoff rate declined to 8.12 percent from 8.73 percent, while smaller Discover Financial Services DFS.N said its rate fell to 8.69 percent from 9.16 percent.
But Capital One's COF.N chargeoff rate for U.S. credit cards rose to 9.77 percent from 9.32 percent. Capital One shares fell 3.13 percent to $38.12 on the New York Stock Exchange.
TREND SEEMS UNSUSTAINABLE
Credit card delinquencies, which earlier this year declined thanks to tax refunds, rose across the board in September as more and more Americans lost their jobs.
Bank of America said late payments rose to 7.53 percent in September from 7.47 percent in August, while Citigroup’s delinquencies went up to 5.50 percent from 5.38 percent. JPMorgan’s delinquencies increased to 4.69 percent from 4.48 percent.
Capital One’s late payments went up to 5.38 percent from 5.09 percent.
“The magnitude of the increase in delinquencies was higher than what people thought,” said Scott Valentin, an analyst at FBR Capital Markets.
American Express was the exception, as delinquencies were stable at 4.1 percent. Its shares rose 1.28 percent to $35.54.
Analysts said the trend of delinquencies suggested credit card losses will peak next year, confounding recent estimates that bad loans would peak in 2009.
“Call us old-fashioned, but it seems that if significantly more people are out of work (and that number is climbing at an annual rate of more than 3 million) that the risk of higher credit losses is increasing,” Credit Suisse analyst Moshe Orenbuch wrote in a note to clients.
As card losses rose to record highs in recent months, lenders closed millions of accounts, trimmed credit limits and slashed rewards. The companies are also raising fees and interest rates ahead of a new consumer-protection law that takes effect in February.
Shares of Bank of America fell 2.64 percent to $18.10, JPMorgan ended unchanged at $47.16, and Discover declined about 1 percent to $16.10 on the NYSE. (Reporting by Juan Lagorio; Editing by Tim Dobbyn, Leslie Gevirtz, John Wallace and Richard Chang)