Overdue credit card debt, fees increase in January as interest rates rise (NYSE:DFS)
January’s credit card figures generally show some deterioration in credit quality as consumers deal with the realities of their holiday spending. That means the month’s data is often skewed by seasonal trends. Broader view, yes, credit Quality is on a downward trend as pandemic-era stimulus programs have long since expired (with the exception of the pause on federal student loan payments).
Baird analyst David George, who studies six of the seven stocks in the table below, summed up January’s credit card numbers, saying the net fees are worse than the timing. conventional service, a higher-than-expected seasonal debt balance expiration rate, and delinquent debt. increased M/M in line with seasonal expectations. The only stock that George doesn’t include in the Alpha Search is Financial Bread (NYSE:BFH).
In the broader picture, George said, card losses continue to reach the “normal” range, which is pre-pandemic levels, which he expects to happen in fiscal year 2023. his stock is to wait until American Express (NYSE:AXP) and Capital One (NYSE:COF) drag back before adding to positions.
Financial Discovery (NYSE:DFS) had a January delinquency rate of 2.67%, equal to pre-pandemic levels of 2.65%; net fee reduction ratio of 2.81% remained low below 3.45% in January 2020.
Wolfe Research analyst Bill Carcache points out that Discover (DFS) and Financial Bread (BFH) both surpassed their 2019 levels. For the five credit card stocks he insures (AXP, COF, DFS, SYF and BFH), the average delinquency ratio increased 99 basis points over the same period and remained at 44 points lower. basic compared to 2019.
He reiterated his Underweight view of card issuers as Wolfe Research macro strategist Chris Senyek believes the Federal Reserve will trigger a recession as it seeks to cool the market. labor.
“We expect delinquency rates to continue to rise in the coming months before accelerating at year-end due to prolonged lags and possible policy-related changes,” Carcache said in a recent note. currency” will eventually lead to an increase in initial jobless claims. As a result, he predicts “a slight deterioration in credit and higher net fee reductions (30% above 2019 levels, supported by denominator effects as loan growth eventually slows). “
2023 | 2022 | 2020 | ||||||
Company | share | Type | January | December | November | 3 months on average | January | Change bps |
capital one | COF | illegal | 3.65% | 3.43% | 3.32% | 3.47% | 4.10% | -45 |
discount | 3.81% | 3.57% | 3.14% | 3.51% | 4.31% | -50 | ||
American Express | AXP | illegal | 1.00% | 1.00% | 0.90% | 0.97% | 1.60% | -60 |
discount | 1.50% | 1.20% | 1.00% | 1.23% | 2.30% | -80 | ||
JP Morgan | NYSE:JPM | illegal | 0.83% | 0.76% | 0.73% | 0.77% | 1.14% | -thirty first |
discount | 1.17% | 1.24% | 1.64% | 1.35% | 2.19% | -102 | ||
synchronized | NYSE:SYF | illegal | 3.80% | 3.70% | 3.60% | 3.70% | 4.50% | -70 |
adjusted discount | 4.30% | 3.40% | 3.70% | 3.80% | 5.20% | -90 | ||
Detect | DFS | illegal | 2.67% | 2.53% | 2.36% | 2.00% | 2.65% | 2 |
discount | 2.81% | 2.54% | 2.46% | 2.60% | 3.45% | -sixty four | ||
financial bread | BFH | illegal | 5.80% | 5.50% | 5.40% | 5.57% | 6.00% | -20 |
discount | 6.70% | 6.70% | 6.10% | 6.50% | 7.20% | -50 | ||
Citigroup | NYSE:OLD | illegal | 1.04% | 1.01% | 0.98% | 1.01% | 1.58% | -54 |
discount | 1.50% | 1.34% | 1.33% | 1.39% | 2.49% | -99 | ||
american bank | NYSE:NORTH | illegal | 1.09% | 1.03% | 1.02% | 1.05% | 1.61% | -52 |
discount | 1.50% | 1.43% | 1.33% | 1.42% | 2.54% | -104 | ||
Average delinquency | 2.49% | 2.35% | 2.29% | 2.37% | 2.90% | -41 | ||
Average discount | 2.91% | 2.68% | 2.59% | 2.73% | 3.71% | -80 |
The Federal Reserve Bank of New York’s Q4 household debt and credit report shows credit card balances reached a new high series at $986 billion. That signals trouble when the next recession hits. “It’s three times more troublesome for credit card borrowers,” said Ted Rossman, senior industry analyst at Bankrate. credit (46% credit card holders, up from 39% a year ago)”. .
SA Contributor Lance Roberts explains why consumers are likely to is the biggest loser when the recession hits.