Magazine article American Banker

Yields for Issuers Fall, but Credit Quality Improves

Magazine article American Banker

Yields for Issuers Fall, but Credit Quality Improves

Article excerpt

Byline: Harry Terris

Several major credit card issuers' portfolio yields dropped sharply in April, the second full month after key provisions of a landmark consumer protection law that is reshaping industry practices took effect.

However, monthly performance statistics, released Monday, also showed improvement in credit quality, supporting the view that lenders are beginning to exit a period of record loan losses.

Revenues as a percentage of securitized receivables dropped 266 basis points from the previous month, to 17.3% at Capital One Financial Corp. But the chargeoff rate for the company's entire domestic card portfolio - including receivables not funded through securitization - fell 119 basis points, to 9.68%, and the portion of accounts more than one month past due fell 23 basis points, to 5.07%.

American Express Co., Discover Financial Services and JPMorgan Chase & Co. joined Capital One by posting lower delinquency and chargeoff rates.

At Bank of America Corp., where credit losses have been the worst among the top-six issuers, the chargeoff rate increased 17 basis points month over month, to 12.7%, but the delinquency rate fell 34 basis points, to 6.73%.

In a note to clients published Monday, Paul Miller, an analyst at FBR Capital Markets, emphasized a 20-basis-point decline in the portion of receivables overdue by 30 days to 59 days at B of A, to 1.51%. "Early stage delinquencies" offer a valuable window on newlyemerging credit problems, and Miller wrote that the sharp improvement "could signal that losses will return to precrisis levels," though the trend will have to continue "before we get too optimistic. …

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