Credit card performance trends closer to seasonal patterns in January (NYSE:JPM)

Credit card issuers’ average delinquency and net charge-off rates continued to climb higher in January as compared with December, bringing credit card metrics higher still from the prepandemic level of four years ago, according to data compiled by Seeking Alpha.

The average delinquency rate increased to 3.24% in January from 3.01% in December, while holding above the 2.90% level from the prepandemic month of January 2020. The average charge-off rate of 4.21% jumped from 4.05% in December and sat above the 3.71% level of four years ago.

Meanwhile, credit card lending dipped from the prior month, with the total of $495.4B of receivables for the eight companies tracked slipping 1.6% M/M, but rising 9.9% Y/Y. That’s in line with seasonal demand, said Jefferies analyst John Hecht in a recent note. “Issuers have tightened credit, given the current macro, and should expect much weaker loan growth in ’24.”

Citi analyst Aren Cyganovich said: “Year-over-year loan growth decelerated further from elevated levels as issuers are tightening credit and face tougher comparisons following strong growth over the past year plus.”

However, consumers’ financial situation appears to remain relatively strong, as average payment rates are still ahead of prepandemic levels, even as they fell 0.6% Y/Y, he noted.

Both American Express (NYSE:AXP) and Capital One Financial (NYSE:COF) experienced M/M improvements in net charge-off rates as both had unusual items that increased their December net charge-offs, Cyganovich said.

“Overall, credit is moving in line with our expectations, although we had hoped to see further deceleration in y/y delinquency rates, which improved for COF but were flattish to slightly worse for the others,” he summarized.

Jefferies’s Hecht observed that seasonality is becoming more prevalent as the economy moves further past the pandemic. However, the year-over-year percentage change in delinquencies rose 3 basis points compared with the prior month, but remained “well below” the peak October/November percent change.

“We think the focus of the next few months will be on a declining Y/Y delinquency trend in order for the peak net charge-off Y/Y percent change to manifest itself in mid-24, a factor that many are planning on at this juncture,” he wrote in a note to clients.

			2024	2023					bps change, Jan 2023 to Jan. 2020
Company	Ticker	Type	Jan.	Dec.	Nov.	Jan.	3-month average	Jan. 2020
Capital One	COF	delinquency	4.78%	4.61%	4.55%	3.65%	4.65%	4.10%	68
		charge-off	5.71%	5.78%	5.19%	3.81%	5.56%	4.31%	140
American Express	AXP	delinquency	1.50%	1.40%	1.40%	1.00%	1.43%	1.60%	-10
		charge-off	2.10%	2.50%	1.70%	1.50%	2.10%	2.30%	-20
JPMorgan	NYSE:JPM	delinquency	1.07%	1.00%	0.99%	0.83%	1.02%	1.14%	-7
		charge-off	1.72%	1.69%	1.75%	1.17%	1.72%	2.19%	-47
Synchrony	NYSE:SYF	delinquency	4.90%	4.70%	4.70%	3.80%	4.77%	4.50%	40
		adjusted charge-off	6.00%	5.60%	5.60%	4.30%	5.73%	5.20%	80
Discover	NYSE:DFS	delinquency	4.02%	3.87%	3.76%	2.67%	3.88%	2.65%	137
		charge-off	5.23%	4.90%	4.71%	2.81%	4.95%	3.45%	178
Bread Financial	NYSE:BFH	delinquency	6.80%	6.50%	6.50%	5.80%	6.60%	6.00%	80
		charge-off	8.00%	8.20%	7.90%	6.70%	8.03%	7.20%	80
Citigroup	NYSE:C	delinquency	1.51%	1.45%	1.47%	1.04%	1.48%	1.58%	-7
		charge-off	2.65%	2.34%	2.21%	1.50%	2.40%	2.49%	16
Bank of America	NYSE:BAC	delinquency	1.35%	1.42%	1.41%	1.09%	1.39%	1.61%	-26
		charge-off	2.23%	2.27%	2.24%	1.50%	2.25%	2.54%	-31
		Avg. delinquency	3.24%	3.01%	3.00%	2.49%	3.09%	2.90%	34
		Avg.charge-off	4.21%	4.05%	3.32%	2.91%	3.86%	3.71%	49