Tuesday, September 15, 2009

Credit Cards: Most Institutions Report higher Write-Offs in August

by Calculated Risk on 9/15/2009 07:42:00 PM

From Bloomberg: U.S. Credit-Card Defaults Resume Ascent as Unemployment Worsens (ht Bob_in_MA)

Bank of America said write-offs rose to 14.54 percent ... That compares with 13.81 percent in July ...

Citigroup’s soured loans rose to 12.14 percent last month, from 10.03 percent, while JPMorgan said write-offs advanced to 8.73 percent from 7.92 percent in July ...

Discover Financial Services ... said charge-offs rose to 9.16 percent from 8.43 percent in July. ...

Capital One Financial Corp. ... said charge-offs improved to 9.32 percent in August, from 9.83 percent.
...
Moody’s Investors Service has said it expects average U.S. charge-offs to peak at 12 percent to 13 percent in 2010.
As a reminder, the bank stress tests assumed a cumulative two year credit card loss rate of 18% to 20% for the more adverse scenario (only 12% to 17% for the baseline scenario). Right now losses are running worse than the more adverse scenario.

Also credit card loss rates tend to the track unemployment - so, as the unemployment rate rises into 2010, the credit card charge-offs will probably increase some more.