On Friday several major credit card companies, like Bank of America, JPMorgan Chase and Co, and The OneBank, noticed their shares fell in price. Analysts believe this is due to credit card delinquencies. It’s true delinquencies have slowed.
But, the rate at which they have slowed is also slowing. This is adding fuel to the rising fears that these banks will not be able to recover from the major losses they’ve received on credit cards and loans in the last couple of years. The public is concerned that it may take years for card companies to recover. The evidence is certainly pointing in that direction.
The CEO of JPMorgan Chase indicated that he did not expect the credit card portfolio to “bottom out” until the end of the 3rd quarter of 2011. If his estimations are accurate, there is still another year to struggle through, but the news isn’t all bad. The decrease in losses is definitely a good sign. Certainly, some companies are showing less percentages of losses than others and those are the ones who have already had smart lending practices in place and are most likely going to be the first to pull out of this mess.
Delinquencies fell at most of the major credit card companies. The Bank reported their delinquencies remained flat. Since delinquencies are the early signs of charge offs, it’s safe to think there won’t be another surge of losses again in the near future. While this is good news, the concern is that loss rates are still extremely high at most lending companies, and there is no indication that they will improve any time soon. It certainly appears like it will be a long and slow dig for each company to get themselves back on top. But, the lessening of delinquencies does appear to be a light at the end of the tunnel.
Credit card companies are having a difficult time increasing their businesses because the economy is still shaky. The consumers who have the credit scores to qualify for new debt are very reluctant to take it on. Many consumers are trying to learn the concept of living within their means instead of relying on credit, so they aren’t in a financial mess if someone in the household were to lose a job. Since consumers can’t be certain of what the future holds for employment, it definitely stands to reason that they would be careful about taking on new debt.
Many consumers simply don’t have the credit scores and thus shouldn’t be taking on any new debt anyway. They’re still struggling to dig themselves out of the financial rut they got themselves into when the crisis occurred in the first place. Others still have not found employment and will not be taking out any new loans or credit cards until their situations improve.
There remains more to be seen as Bank of America, Citigroup Inc, and American Express are still expected to report their monthly credit card performances later in the day.