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Average net charge-off rate trends higher for 6 major US card issuers in August


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Average net charge-off rate trends higher for 6 major US card issuers in August

The average annualized net charge-off rate for the six major US credit card issuers rose sharply in August, with credit metrics moving closer to pre-pandemic levels.

After sequential declines in June and July, the average net loss rate for JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., American Express Co., Capital One Financial Corp. and Discover Financial Services increased to 1.80% in August, up 75 basis points year over year, according to the firms' monthly Form 10-D filings.

The 14-basis-point sequential rise in the average net loss rate in August was just below the 17-basis-point monthly increase in March, the largest sequential rise in two years.

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All of the companies except American Express logged monthly increases in credit card net charge-offs. American Express' net charge-off rate declined 5 basis points sequentially to 1.11% in August.

Citigroup posted the highest sequential rise in the annual net charge-off rate in August at 1.97%, up 32 basis points from July and 64 basis points from a year earlier.

Bank of America's net loss rate was up 24 basis points sequentially to 2.12% in August — the highest net charge-off rate among the six card issuers. The company's 30-plus-day delinquency rate also continued rising in August, up 2 basis points sequentially to 1.26%, its highest level since March 2021.

Speaking at a company conference, Dean Athanasia, president of regional banking at Bank of America, expressed optimism about consumer spending levels and credit quality for the rest of 2023.

"Clients ... they've got plenty of cash," Athanasia said during the Sept. 11 Barclays annual conference. "They are paying off their credit cards, [and] have not seen any deterioration there. And so credit quality on average is looking really good and we'll see where it takes us."

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Credit card delinquencies continue to trend higher

Across the six major US card issuers, the average 30-plus-day credit card delinquency rate increased 4 basis points sequentially to 1.21%, which was also 39 basis points higher on a yearly basis.

Capital One Financial continued to post the highest delinquency rate among the six issuers. The company's 30-plus-days delinquency rate ticked up 8 basis points sequentially to 1.62% in August. The company's yearly jump in delinquencies, 59 basis points, was the highest among the group in August.

American Express posted the lowest 30-plus-day delinquency rate at 0.69%, a 2-basis-point uptick month over month and a 21-basis-point increase on a yearly basis.

Portfolio yields down for 3 out of 6 companies

Three companies — Bank of America, Citi and Discover Financial — reported sequential declines in portfolio gross yields. Citi logged the largest monthly decline in portfolio yield, with a 34-basis-point decrease to 22.31% in August.

American Express posted the highest portfolio yield for August, 31.36%, a monthly increase of 41 basis points and a yearly increase of 248 basis points.

The average portfolio gross yield for the six companies was 24.24% in August, up 5 basis points from July.

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