The nation's top credit card companies on Monday reported mixed progress in reducing the rate at which customers default on their accounts. Higher monthly default rates at Bank of America and Citigroup offset improvements for most other major card issuers.
Analysts said July's mixed results, along with the recent slowdown in the economic recovery, are unlikely to jeopardize a two-year trend of declining default rates. Most card issuers reported that fewer customers were behind on monthly payments in July. This should lead to fewer defaults late this year.
The higher default rates at Bank of America and Citi "are just monthly noise," Moody's analyst Jeff Hibbs said. "The overarching trend of improvement across the industry continues."
Three of the six top card issuers reported lower default rates in July, compared with the previous month. In terms of late payments, four of six had lower delinquency rates.
Bank of America Corp. continues to have the highest default rate among six major card issuers, but it is down substantially from the 14.53 percent the bank reported in August 2009.
The credit card division of Bank of America reported in a securities filing that it wrote off credit card balances at an annualized rate of 7.43 percent last month, up from 6.97 percent in June.
The July figure reflects a one-time impact from an accounting change for how to recognize losses in accounts of customers who have died. Excluding that change, July's charge-off rate would have been 7.14 percent.
Its rate of payments that were late by 30 days or more fell to 4.05 percent in July, from 4.16 percent in June. It was the 10th consecutive month the delinquency rate has fallen.
Citibank, the card division of Citigroup Inc., said its default, or charge-off rate, rose to 6.64 percent annualized for July, up from 6.47 percent in June, snapping a four-month string of decreases. As with Bank of America, Citibank's delinquencies fell: Payments late 35 days or more dropped to 3.39 percent in July from 3.56 percent in June.
That rate has returned to levels that Citibank hasn't seen since the Great Recession began in late 2007.
Citibank reported its early stage delinquencies _ payments late 35 to 64 days _ fell to 0.92 percent from 0.99 percent in June.
Hibbs said that's a strong indicator that Citibank's default rate is likely to decline late this year.
Cynthia Ullrich, an analyst with Fitch Ratings, said she sees default rates for key issuers stabilizing at levels that are closer to historic averages, compared with highs reached in the recession.
Credit card issuers typically write off balances as uncollectible after they reach six months past due.
Chase, the card division of JPMorgan Chase & Co., and the nation's largest card issuer, said its charge-off rate in July fell to 4.78 percent of balances, from 4.94 percent in June. The July rate is Chase's lowest in nearly three years.
Payments late by 30 days or more fell to 2.52 percent in July, from 2.59 percent in June, Chase said.
Discover Financial Services said that its customers defaulted last month at the lowest rate since before the recession. The company wrote off $54.4 million in uncollectible bills in July. That's 3.83 percent of balances on an annualized basis. In June, Discover wrote off $59.4 million, or 4.04 percent.
American Express Co. said its lowest-in-the-industry default rate rose to 2.8 percent, up from 2.7 percent in June. The increase snapped a four-month string of month-to-month declines. Amex's default rate remains well below any of its competitors, reflecting its more affluent customer base and its stricter management of troubled accounts. Amex's rate of delinquencies was 1.5 percent in July, unchanged from June.
Capital One Financial Corp. reported its defaults fell to $169 million, or 3.77 percent of balances on an annualized basis, down from $198 million, or 4.41 percent of balances, in June. Delinquencies edged up to 3.37 percent of balances rate from 3.33 percent in June.