| Credit Card Delinquency Rates Lower at American Express |
| By Credit Federal |
Published
07/15/2009
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American Express Credit Card
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Credit Card Delinquency Rates Lower
Two major credit card providers (American Express and Capital One) reported more improvements in delinquency rates last month, an encouraging sign that borrowers are not in as bad shape as many had feared.
The American Express Company said in a regulatory filing (see below) that accounts at least 30 days past due shrunk to 4.4% of total loans during the month ending June 30, after falling to 4.7% in May and 4.9% in April.
Capital One Financial Corp. said its delinquency rate among U.S. cards improved for a fourth straight month, falling to 4.77% from 4.9% in May.
Investors cheered the improving delinquency data, sending shares of both companies sharply higher. American Express rose $2.79 (11.4%) to $27.25 in afternoon trading. Meanwhile, Capital One rose $2.79 (12.1%) to $25.90.
Despite the improvement in delinquency rates, both credit card companies reported mixed results on another measure -- the percentage of loans they have given up on as unrecoverable (chargeoffs).
American Express' chargeoff rate dipped to 9.9% last month from 10% the previous month, but Capital One's rate rose to 9.73% from 9.41%.
During recessions and economic downturns, charge off rates for credit cards often track at similar levels to the overall unemployment rate. The U.S. unemployment rate continued to climb last month, hitting a 26 year high of 9.5%.
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AMERICAN EXPRESS RELEASES U.S. CARD SERVICES DELINQUENCY AND WRITE-OFF STATISTICS
American Express today filed its monthly U.S. Card Services Delinquency and Write-off statistics in a Form 8-K with the Securities and Exchange Commission, as follows:
American Express Company (the Company) is hereby furnishing below owned and managed basis delinquency and write-off statistics for the lending portfolio of its U.S. Card Services (USCS) operating segment for the months ended April 30, May 31 and June 30 2009, and the three months ended June 30, 2009. As previously stated in its reports filed with the Securities and Exchange Commission (the 'Commission'), the Company believes that its managed basis presentation provides the Company's investors with a more comprehensive portrayal of the key dynamics of the Company's U.S. cardmember lending business over time.
The preliminary information reported below for the three months ended June 30, 2009, reflects net write-off rates that are better than the Company's previously disclosed forecast for such period. Notwithstanding these results, the Company recorded additional credit reserves during the quarter to further strengthen its coverage ratios. Assuming delinquency and bankruptcy trends continue to be below previously expected levels, the Company believes that it is highly likely that its USCS lending net write-off rate for each of the third and fourth quarters of 2009 will be better than previously forecasted. If these circumstances occur, the Company would expect to utilize a significant portion of the benefits from better-than-forecasted credit performance on selective investments and other business initiatives during the third and fourth quarters of the year.
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