MicroStockHub/iStock via Getty Images
Credit card metrics for February were broadly in line with trends seen in recent months, continuing to normalize at a gradual pace, with the exception of Bread Financial (New York stock market :BFH).
But the patterns of imputation and delinquency are still generally below pre-pandemic levels, Baird noted. “Given the massive sell-off in financials, combined with healthy credit quality, we will continue to benefit from weakness in Capital One Financial (New York stock market :COF) and American Express (New York stock market :AXP),” said analyst David George.
Jefferies noted that receivables were down 1% M/M, due to seasonal factors typically seen at this time of year. “The current macro/inflationary environment continues to affect non-prime cohorts more intensely, while prime cohorts appear stable,” said analyst John Hecht.
Wolfe Research maintained its underweight position in card issuers Capital One (COF), Discover Financial (New York stock market :DFS), SynchronyFinancial (New York stock market :SYF) and Bread Financial (BFH) following this month’s credit data.
Note that Bread Financial (BFH) is the only credit card issuer with chargeback and net charge rates above the levels it experienced in the pre-pandemic era of February 2020, as shown in the table below.
“Normalization of the delinquency rate continues to outpace seasonality,” said analyst Bill Carcache. “We expect the formation of delinquency rates to continue to rise over the coming months before accelerating later in the year, with the effects of last year’s rate hikes causing a further slowdown and an increase in initial inquiries.”
Meanwhile, KBW remains broadly bullish on card issuers as “these companies warrant a higher valuation relative to the regional banking space.”
| 2023 | 2022 | 2020 | ||||||
| Business | Teleprinter | Type | FEBRUARY | January | December | average over 3 months | FEBRUARY | Change of base points |
| Capital one | COF | delinquency | 3.72% | 3.65% | 3.43% | 3.60% | 3.88% | -16 |
| dampen | 4.16% | 3.81% | 3.57% | 3.85% | 4.68% | -52 | ||
| American Express | AXP | delinquency | 1.10% | 1.00% | 1.00% | 1.03% | 1.60% | -50 |
| dampen | 1.40% | 1.50% | 1.20% | 1.37% | 2.60% | -120 | ||
| JP Morgan | New York stock market :JPM | delinquency | 0.88% | 0.83% | 0.76% | 0.82% | 1.14% | -26 |
| dampen | 1.33% | 1.17% | 1.24% | 1.25% | 2.20% | -87 | ||
| Synchrony | SYF | delinquency | 3.90% | 3.80% | 3.70% | 3.80% | 4.50% | -60 |
| adjusted load | 4.70% | 4.30% | 3.40% | 4.13% | 5.30% | -60 | ||
| Discover | DFS | delinquency | 2.74% | 2.67% | 2.53% | 2.65% | 2.64% | -ten |
| dampen | 3.40% | 2.81% | 2.54% | 2.92% | 3.84% | -44 | ||
| bread financial | BFH | delinquency | 6.00% | 5.80% | 5.50% | 5.77% | 5.90% | ten |
| dampen | 7.80% | 6.70% | 6.70% | 7.07% | 6.80% | 100 | ||
| Citigroup | New York stock market :VS | delinquency | 1.12% | 1.04% | 1.01% | 1.06% | 1.58% | -46 |
| dampen | 1.55% | 1.50% | 1.34% | 1.46% | 2.64% | -109 | ||
| Bank of America | New York stock market :BAC | delinquency | 1.14% | 1.09% | 1.03% | 1.09% | 1.58% | -44 |
| dampen | 1.61% | 1.50% | 1.43% | 1.51% | 2.55% | -94 | ||
| Avg. delinquency | 2.58% | 2.49% | 2.35% | 2.47% | 2.85% | |||
| Avg. dampen | 3.24% | 2.91% | 2.68% | 2.94% | 3.83% | |||
SA contributor Harrison Schwarz takes a cautious view of Capital One (COF) on the possibility that defaults will skyrocket in 2023.