U.S. credit card delinquencies down again in April

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U.S. credit card delinquencies fell for the fourth straight month in April, but analysts cautioned that the industry will be slow to rebound from the high credit losses of the last two years.Default rates fell to their lowest level of the year for most of the six major U.S. card lenders. Bank of America Corp was an exception, reporting an increase in net charge-offs.While the latest results beat or met expectations, analysts and industry executives said that as U.S. unemployment hovers near 10 percent, default rates and delinquencies are likely to remain high.Analysts said the high levels of credit losses, paired with threats of new regulation after last week's proposal in the U.S. Senate to limit debit card fees, have some concerned about the industry's revenue prospects."Charge-offs are going to come down much more slowly than they went up," said Jason Arnold, analyst with RBC Capital Markets, citing the sluggish economic recovery.Credit card bankers, analysts and vendors at the Card Forum and Expo in Orlando, Florida, said they were reluctant to read too much in to the improving delinquency rates, which often decline in the early part of the year as consumers receive tax refunds."For us, until unemployment gets back to ... (levels of) significant improvement, we cannot expect to get out of this morass," Joe Purzycki, chief operating officer of Barclaycard US, said in an interview on Monday at the industry conference in Orlando. "You'd think (economic) growth would mean more jobs, people back to work, and we'd be able to worry less about our loss picture. But we're not at that point yet."Shares of American Express Co and Bank of America Corp posted gains on the day, amid a broader industry sell-off which the positive credit data did not counter.American Express Co shares closed Monday up 1.43 percent at $41.22. Bank of America closed up 1 cent at $16.35.Citi shares posted the largest loss of the six companies, dropping 3.02 percent, or 12 cents, to $3.86.Shares of Discover Financial Services, JPMorgan Chase & Co and Capital One Financial Services were also down on the day.APRIL RESULTSAmerican Express said its annualized net charge-offs, or loans it has written off as uncollectable, dipped to 6.7 percent in April from 7.5 percent in March, the lowest among the six companies. The 30-day delinquency rate also declined slightly to 3.1 percent.Bank of America, the largest U.S. card issuer, had the highest level of net charge-offs at 12.71 percent, up from 12.54 percent, but its 30-day delinquencies dropped to 6.73 percent from 7.07 percent.Capital One's net charge-off rate for U.S. credit cards fell to 9.68 percent from 10.87 percent. Accounts at least 30 days delinquent declined to 5.07 percent from 5.30 percent.Net charge-offs at Citi declined to 11.23 percent from 11.55 percent a month prior, as delinquencies also decreased.JPMorgan's net charge-offs declined in April by nearly half a percentage point, to 9.03 percent from 9.51 percent in March. Its 30-day delinquency rate dropped to 4.40 percent from 4.51 percent.Discover Financial said its annualized net charge-off rate fell to 8.42 percent in April from 8.51 percent in March. The company's 30-day delinquencies declined to 5.20 percent from 5.39 percent.REGULATIONThe new regulation looms another threat to the industry's dampened earnings in recent years.The U.S. Senate approved an amendment to the financial regulation bill on Thursday that would curb debit card fees and allow merchants to set limits on credit and debit card transaction fees.So-called card interchange fees account for about a fifth of the credit card revenues at banks. The amendment would not directly limit credit card fees but many fear that it could lead to wider restrictions.The amendment became the hot topic on Monday at the Orlando conference."Interchange is kind of the Holy Grail around here," Purzycki said.(Reporting by Joe Rauch in Charlotte, N.C., Brenton Cordeiro in Bangalore and Maria Aspan in Orlando, Florida; Editing by John Wallace, Bernard Orr and Matthew Lewis)
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