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Credit card metrics for December extended their long, gradual path to the pre-pandemic level of delinquencies and net charge-offs, as seen in the table below. With pandemic-era tax relief programs largely over, more consumers have fallen behind on credit cards. Payments
At most credit card companies, both metrics have worsened since November, but are still better than December 2019 levels. Notable exceptions are JPMorgan Chase (New York Stock Exchange: JPM), which saw its net cancellation rate of 1.24% fall from 1.64%, and Synchrony Financial (New York Stock Exchange:SYF), which saw its adjusted net churn rate fall to 3.4% from 3.7%.
However, one company experienced a churn rate that exceeded its December 2019 level. Pan Financiero (New York Stock Exchange: BFH), formerly Alliance Data Systems, experienced a net churn rate of 6.7%, up from the December 2019 level of 6.10%.
Earlier this month, credit card stocks fell after Discover Financial (New York Stock Exchange: DFS) said it expects the full-year 2023 net churn rate to rise to 3.5%-3.9% from 1.82% reported in 2022.
Capital One Financial (NYSE:COF) also expects delinquencies and charge-offs to rise, as it set aside more for bad debt in the fourth quarter. His provision for credit losses rose to $2.42 billion, more than Wall Street had expected, and higher than the $1.67 billion provision he took in the third quarter.
Odeon Capital analyst Dick Bove is wary of the COF. “Capital One (COF) has moved aggressively and effectively to build its credit card lending book over the past two years,” he wrote in a note to clients. “The move was successful, but now the company must deal with reversals in that and other loan books. We would not add positions at this time.”
| 2022 | 2019 | ||||||
| Company | Heart | Writes | December | November | October | 3 month average | December |
| capital one | COF | delinquency | 3.43% | 3.32% | 3.17% | 3.31% | 3.93% |
| cancellation | 3.57% | 3.14% | 2.93% | 3.21% | 4.55% | ||
| amexpress | New York Stock Exchange:AXP | delinquency | 1.00% | 0.90% | 0.90% | 0.93% | 1.60% |
| cancellation | 1.20% | 1.00% | 0.90% | 1.03% | 2.50% | ||
| JPMorgan | JPM | delinquency | 0.76% | 0.73% | 0.73% | 0.74% | 1.17% |
| cancellation | 1.24% | 1.64% | 1.19% | 1.36% | 2.20% | ||
| Synchrony | FIS | delinquency | 3.70% | 3.60% | 3.40% | 3.57% | 4.60% |
| adjusted cancellation | 3.40% | 3.70% | 3.40% | 3.50% | 4.90% | ||
| financial bread | BFH | delinquency | 5.50% | 5.40% | 5.40% | 5.43% | 5.80% |
| cancellation | 6.70% | 6.10% | 6.10% | 6.30% | 6.10% | ||
| Citigroup | New York Stock Exchange:C | delinquency | 1.01% | 0.98% | 0.90% | 0.96% | 1.56% |
| cancellation | 1.34% | 1.33% | 1.32% | 1.33% | 2.77% | ||
| Bank of America | New York Stock Exchange: BAC | delinquency | 1.03% | 1.02% | 0.98% | 1.01% | 1.60% |
| cancellation | 1.43% | 1.33% | 1.38% | 1.38% | 2.54% | ||
| average crime | 2.35% | 1.99% | 2.21% | 2.18% | 2.89% | ||
| average cancellation | 2.70% | 2.61% | 2.46% | 2.59% | 3.65% | ||
Please note that Discover Financial (DFS) does not collect monthly credit card metrics for the last month of each quarter. Its credit card delinquency rate in the fourth quarter increased to 2.53% from 2.11% in the third quarter and its net charge-off rate increased to 2.37% from 1.92%.
SA contributor Komal Sarwar sees potential for pain at Capital One (COF) in the coming quarters as economic uncertainty and interest rate hikes could lead to a recession.
