Credit card trends continue normalizing in February, nearing prepandemic levels
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Credit card metrics for February were largely consistent with trends seen in recent months, continuing to normalize at a gradual pace, with the exception of Bread Financial (NYSE:BFH).
But charge-off and delinquency trends are still generally below prepandemic levels, Baird noted. "Given the broader sell-off in financials, combined with healthy credit quality, we would continue taking advantage of weakness on Capital One Financial (NYSE:COF) and American Express (NYSE:AXP)," said analyst David George.
Jefferies noted that receivables declined 1% M/M, driven by seasonal factors typically seen at this time of the year. "The current macro/inflationary environment continues to affect the non-prime cohorts more acutely, while prime cohorts appear stable," said analyst John Hecht.
Wolfe Research maintained its Underweight stance on card issuers Capital One (COF), Discover Financial (NYSE:DFS), Synchrony Financial (NYSE:SYF), and Bread Financial (BFH) following this month's credit data.
Note that Bread Financial (BFH) is the only credit card issuer with delinquency and net charge-off rates that are higher than levels it experienced in the prepandemic era of February 2020 as seen in the table below.
"Delinquency rate normalization continues to exceed seasonality," said analyst Bill Carcache. "We expect delinquency rate formations to continue to rise over the coming months before accelerating later in the year as the effects of last year's rate hikes drive further slowing and lead to an increase in initial claims."
Meanwhile, KBW remains bullish on card issuers broadly as "these companies warrant a premium valuation relative to the regional banking space."
| 2023 | 2022 | 2020 | ||||||
| Company | Ticker | Type | February | January | December | 3-month average | February | Change in bps |
| Capital One | COF | delinquency | 3.72% | 3.65% | 3.43% | 3.60% | 3.88% | -16 |
| charge-off | 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 |
| charge-off | 1.40% | 1.50% | 1.20% | 1.37% | 2.60% | -120 | ||
| JPMorgan | NYSE:JPM | delinquency | 0.88% | 0.83% | 0.76% | 0.82% | 1.14% | -26 |
| charge-off | 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 charge-off | 4.70% | 4.30% | 3.40% | 4.13% | 5.30% | -60 | ||
| Discover | DFS | delinquency | 2.74% | 2.67% | 2.53% | 2.65% | 2.64% | -10 |
| charge-off | 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% | 10 |
| charge-off | 7.80% | 6.70% | 6.70% | 7.07% | 6.80% | 100 | ||
| Citigroup | NYSE:C | delinquency | 1.12% | 1.04% | 1.01% | 1.06% | 1.58% | -46 |
| charge-off | 1.55% | 1.50% | 1.34% | 1.46% | 2.64% | -109 | ||
| Bank of America | NYSE:BAC | delinquency | 1.14% | 1.09% | 1.03% | 1.09% | 1.58% | -44 |
| charge-off | 1.61% | 1.50% | 1.43% | 1.51% | 2.55% | -94 | ||
| Avg. delinquency | 2.58% | 2.49% | 2.35% | 2.47% | 2.85% | |||
| Avg. charge-off | 3.24% | 2.91% | 2.68% | 2.94% | 3.83% | |||
SA contributor Harrison Schwarz takes a cautious view of Capital One (COF) on the potential for defaults to soar in 2023.