Delinquency rates hit multiyear highs at major US card issuers in September

The average 30-plus-days credit card delinquency rate rose 7 basis points in September, hitting a three-year high for the six major card issuers, according to an S&P Global Market Intelligence analysis.

On a year-over-year basis, the average 30-plus-days delinquency rate for the combined JPMorgan Chase & Co., American Express Co., Capital One Financial Corp., Bank of America Corp., Citigroup Inc. and Discover Financial Services jumped 41 basis points to 1.28%. That is the highest figure since the six issuers had an average delinquency rate of 1.33% in June 2020.

Delinquencies still low compared to historical standards

Capital One Financial posted the highest 30-plus-days delinquency rate in September at 1.74%, as well as the largest sequential and yearly jumps, at 12 and 63 basis points, respectively.

Capital One's 30-plus-days performing delinquency rate for domestic credit cards stood at 4.31% in the third quarter, up 57 basis points from the second quarter and up 134 basis points from the 2022 third quarter, according to a public company filing.

President, Chairman and CEO Richard Fairbank during a third-quarter earnings call said the pace of delinquency rate normalization following the pandemic lows is slowing.

"In August and September, the month-to-month movement in our delinquencies was essentially in line with normal seasonality for the first time since normalization began," Fairbank said. "We've seen some stabilization in new delinquency entries relative to normal seasonal patterns. So we are hopeful these stabilization trends continue."

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Discover also logged a sequential increase of 12 basis points in its 30-plus-days delinquency rate, which rose to 1.63% in September. The rate was up 51 basis points on a yearly basis and the company's highest level since May 2020.

CFO John Greene during a third-quarter earnings call predicted that delinquencies will slow in the first half of 2024.

"If that doesn't happen, that's an indication that the stress that the consumers are seeing is more significant than what we're observing today," he added.

Discover's provision expense grew by $929 million in the third quarter, reflecting a $297 million increase in reserve build and a $631 million increase in net charge-offs. The 30-plus-days delinquency rate for credit card loans came in at 3.41% as of Sept. 30, up 130 basis points year over year and up 55 basis points from the prior quarter, according to an Oct. 18 filing.

The company might have to take "incremental provisions" if delinquency rates do not slow until the first quarter of 2024, Greene said during the earnings call.

Average net loss rate flat sequentially

The average annualized net loss rate for the six major credit card issuers came in at 1.80% for September, unchanged from August. Four of the six companies in the analysis logged sequential declines in their net charge-off rates.

Citigroup recorded the highest net loss rate among the six companies in September at 2.13%. Citi's loss rate grew 101 basis points on a yearly basis, the highest year-over-year increase among the six companies.

Citi's net credit loss (NCL) rate for branded cards stood at 2.72% in the third quarter, up 25 basis points from the previous quarter and 120 basis points up from the 2022 third quarter.

"Our expectation is that as we go into '24 ... we're likely to see this tick up above those pre-COVID normalized rates," CFO Mark Mason said in a call to discuss third-quarter results.

Citi expects to end the year at pre-COVID-19 normalized NCL rates of 3% to 3.25% for branded cards and 5% to 5.5% for retail services, Mason added.

Portfolio yields down for 4 out of 6 issuers

Four companies — Capital One, Citigroup, JPMorgan, and Discover — reported sequential declines in portfolio gross yields. Capital One posted the largest monthly decline in portfolio yield, with a 60-basis-point decrease.

American Express had the highest gross portfolio yield in the group in September at 31.36%, a 225-basis-point increase year over year.

The average gross portfolio yield for the six issuers declined 25 basis points on a monthly basis to 23.99%.

Access data on credit card master trust yields, net charge-offs and delinquencies in Excel format.