* Bank card defaults rise to 10 percent in May - S&P
* Delinquencies fall to 5.7 percent in May - S&P
* S&P sees defaults rising to 10.5-12.5 percent
NEW YORK, July 7 (Reuters) - The charge-off rate of U.S. credit cards issued by banks rose to a record in May as unemployment grew to a 26-year high, Standard & Poor’s said on Tuesday.
The U.S. credit quality index — which tracks $414.8 billion of bank card receivables backing S&P rated asset-backed securities — rose to 10 percent from 9.4 percent in April.
The index soared 66.8 percent compared to a year ago.
The S&P index also showed delinquencies — monthly payments more than 30 days late — fell to 5.7 percent from 6.1 percent.
Among private-label cards, defaults rose to 12.2 percent in May from 11.7 percent in April, while delinquencies declined to 6.9 percent from 7.1 percent.
Analysts have attributed the decline in delinquencies to a seasonal trend, as consumers used tax refunds to pay back debts.
Credit card losses usually track unemployment, which rose to 9.4 percent in May and is expected to peak above 10 percent by the end of 2009 or in early 2010.
Standard & Poor’s credit analyst Michael Wray estimated that chargeoffs, which are debts that banks do not expect to be repaid, could rise to between 10.5 and 12.5 percent in the next 12 to 18 months, assuming unemployment increases to between 10.6 and 12.7 percent.
The unemployment rate was at 9.5 percent in June.
With credit card losses across the industry surpassing 10 percent this year, loan losses in the sector could top $70 billion, according to analysts’ estimates.
Data released by credit card companies last month revealed that defaults rose across the board in May, based on the performance of loans that were securitized, with a steep deterioration of Bank of America Corp’s (BAC.N) lending portfolio.
However, top Visa-branded credit card issuer JPMorgan Chase and Co (JPM.N), Discover Financial Services (DFS.N) and Capital One Financial Corp (COF.N), showed better than expected default rates. (Reporting by Juan Lagorio, editing by Matt Daily)