Credit card delinquency rates continued to improve in May, firming a months-long trend.
The six major issuers on Tuesday reported bigger-than-expected declines in the percentage of loans 30 days or more past due in monthly filings with the Securities and Exchange Commission. Delinquencies are closely watched because they are a reliable indicator of future losses.
"We're looking at more significant declines in delinquencies than we would on average," said Sanjay Sakhrani, an analyst at KBW Inc.'s Keefe, Bruyette and Woods Inc.
Chargeoff rates fell at several issuers as well, underscoring a growing belief among industry experts that losses have likely peaked.
"I think the peak has been seen, barring any meaningful spike in initial jobless claims or deterioration in the employment situation, or a pickup in bankruptcies," Sakhrani said.
At Capital One Financial Corp. the delinquency rate fell for a fourth straight month, by 27 basis points, to 4.8%, better than several analysts expected.
The decline is "further proof that credit is improving more than seasonal trends would dictate and that delinquencies likely peaked this past winter," Barclays Capital analyst Bruce Harting wrote in a research note. "May is normally the last of the three seasonally strong spring months when delinquencies normally decline, but if recent outperformance relative to seasonal [patterns] holds, we'd expect delinquencies to continue to fall even as we enter the seasonally challenging summer and fall months, though at a slowing pace."
The loss rate of Capital One's credit card portfolio dipped 20 basis points, to 9.48%.
At JPMorgan Chase & Co., losses fell to 8.95% of credit card loans outstanding from 9.03% in April. Early-stage delinquencies, or loans 30 to 59 days past due, slipped 9 basis points, to 1%, while total delinquencies fell 18 basis points, to 4.22%. It was the fifth month in a row that total delinquencies declined.
At Discover Financial Services early-stage delinquencies fell to 1.23% and overall delinquencies fell to 4.95%. However, the chargeoff rate inched higher, to 8.82% from 8.42%.
John Stilmar, an analyst at SunTrust Robinson Humphrey, said he had expected Discover's loss rate to rise, because the Riverwoods, Ill., company takes 60 days — longer than some of its peers — to recognize consumer bankruptcies, which spiked in March.
American Express Co. once again reported the lowest losses in the industry. The company's credit card loss rate dropped 40 basis points, to 6.3%.
Chargeoffs at Amex have fallen nearly every month since topping out at 10.1% in April of last year. The delinquency rate, which has been steadily declining since February 2009, fell 20 basis points, to 2.9%.
At Bank of America Corp., which has had the highest delinquency and loss rates among its peers, delinquencies fell 34 basis points, to 6.39%, while chargeoffs rose 62 basis points, to 13.33%.
Losses in Citigroup Inc.’s credit card portfolio slipped 7 basis points to 11.16%. The percentage of loans 35 days or more past due fell 26 basis points to 5.59%.