Credit card

Credit card metrics normalize further in August as loan growth remains strong (NYSE:BAC)

Violeta Stoimenova/E+ via Getty Images

August credit card metrics on eight U.S. issuers signaled continued credit normalization from unusually low levels at the height of the Covid-19 pandemic, as loan growth remained strong, driven by the consumer demand and stubbornly high inflation.

The robust growth in the amount of borrowing during the month showed that consumers remained relatively healthy and continued to spend despite the Federal Reserve’s aggressive measures to tighten financial conditions as well as growing fears of a recession in a extremely slow economic growth.

Looking at it from a different angle, consumer payments for August were up another 13% year-over-year and +7% year-over-year due to higher consumer costs. public services and child care. “Consumers are heading into the fall with solid spending and saving reserves,” said David Tinsley, senior economist at the BofA Institute. “While lower gasoline prices have boosted confidence, consumers have felt some pressure from rising utility bills,” suggesting that inflation is still weighing on people’s purchasing power. consumers.

Meanwhile, the delinquency rate for credit card issuers averaged 2.04% in August, down from 1.89% in July and 1.50% a year ago, as shown by the table below. The average net imputation rate therefore rose to 2.10%, from 2.01% the previous month and 1.82% in August 2021. The normalization trends came as the fiscal support programs that were extended to consumers during the pandemic have now mostly disappeared.

“There is likely a balance between better loan growth and higher funding costs, while spending could remain marginally elevated and credit continues to normalize in 2H22,” the Oppenheimer analyst wrote. Dominick Gabriele in a recent note to clients.

It should be noted that Synchrony Financial’s default and net write-off rates (NYSE: SYF), Bread Financial (NYSE: BFH), formerly Alliance Data Systems and Citigroup (NYSE:C) lagged above the three-month averages.

For Capital One (NYSE: COF) and Bread Financial (BFH), both of which have outsized exposure to consumers with low credit ratings, will likely see credit deterioration first among peers, Gabriele argued, noting that “the delinquency formation of COF is now higher than their card NCO rate and trending back towards 2019 levels.”

Dismissing fears of a recession, Wells Fargo analyst Mike Mayo found non-current and 30-89 day delinquencies were within 5-6 basis points of record highs, it said. he wrote in a note, citing second-quarter data recently released by the Federal Deposit Insurance. Company. “Historically, crime data started to increase a few quarters before a recession, but that’s not the case yet,” he explained.

Starting Friday afternoon, Capital One (COF) (-32%), Synchrony (SYF) (-32%) and Bread (BFH) (-46%) all were overtaken by the broader stock market (SP500) (-19%) by a wide margin year-to-date, while American Express (NYSE: AXP) (-9.6%) and Explore financial services (NYSE: Homeless) (-16%) fared better, as this graph shows.

Earlier (September 8), consumer borrowing fell more than expected in July.

2022
Company Teleprinter Type August July June average over 3 months
Capital one (COF) delinquency 2.76% 2.56% 2.35% 2.56%
dampen 2.02% 2.36% 2.20% 2.19%
American Express (AXP) delinquency 0.80% 0.70% 0.70% 0.73%
dampen 0.80% 0.80% 0.80% 0.80%
JP Morgan (NYSE:JPM) delinquency 0.66% 0.66% 0.66% 0.66%
dampen 1.15% 1.02% 1.18% 1.12%
Synchrony (SYF) delinquency 3.10% 2.90% 2.70% 2.90%
adjusted load 3.10% 3.00% 2.70% 2.93%
Discover Financial (DFS) delinquency 1.96% 1.84% 1.76% 1.85%
dampen 1.86% 1.90% 1.99% 1.92%
bread financial (BFH) delinquency 5.30% 4.80% 4.40% 4.83%
dampen 5.30% 4.50% 5.40% 5.07%
Citigroup (VS) delinquency 0.82% 0.79% 0.79% 0.80%
dampen 1.33% 1.19% 1.10% 1.21%
Bank of America (NYSE: BAC) delinquency 0.88% 0.85% 0.84% 0.86%
dampen 1.24% 1.27% 1.23% 1.25%
Avg. delinquency 2.04% 1.89% 1.78% 1.90%
Avg. dampen 2.10% 2.01% 2.09% 2.06%