Overdue credit card bills show rise in June
NEW YORK - Overdue debts at the six largest US credit card lenders rose in June after falling the two previous months as the effects of tax rebates faded, data compiled by Bloomberg show.
Loans on which payments were late by at least 30 days averaged 4.03 percent of all credit card debt in June, 0.05 percentage points higher than in May, according to reports filed by American Express, Bank of America, Capital One Financial, JPMorgan Chase, Citigroup, and Discover Financial Services.
"The broader economy and the employment situation are likely to remain weak for the remainder of the year," Sanjay Sakhrani, an analyst at KBW Inc. said in a July 15 research note on credit card lenders. Rising unemployment may "lead to further deterioration in credit quality at card issuers."
Credit card defaults are increasing this year as rising unemployment and prices for food and fuel squeeze consumers. American Express chief executive Kenneth Chenault said last month the US economic slowdown worsened in June, affecting even wealthier cardholders with high credit scores. The United States lost 62,000 jobs in June, the sixth straight monthly decline.
In May, late payments had dropped 0.1 percentage points from April, and in April by 0.03 percentage points from March, as consumers used tax refunds to pay down debt, Sakhrani said. Delinquencies at the card lenders averaged 3.30 percent in June 2007, according to Bloomberg data.
American Express had the largest rise in late payments in the month, to 3.21 percent from 3.05 percent. The lender has added more customers in the past few years compared with other firms and newer accounts have higher failure rates, analysts have said.
The company had its credit outlook changed to "negative" from "stable" by Standard & Poor's Rating Services. The New York-based lender's future results may be hurt by "further declines in the housing market combined with increases in unemployment," Standard & Poor's said yesterday.
Oppenheimer analyst Meredith Whitney and Calyon Securities' Craig Maurer downgraded American Express from the equivalent of "buy" to "hold" Tuesday.
American Express was first in the total of purchases and cash advances to US cardholders in the first half of 2007, according to the Nilson Report, a trade publication. JPMorgan Chase and Bank of America were second and third.
