Daniel Henry, American Express Co.'s chief financial officer, told investors this month that the company's loan portfolio is in far better shape than it was in late 2007, should the economy slump into another recession.
Reports on credit card performance filed by major issuers in mid-September — the first round of data since the debt-ceiling standoff and since the euro-zone crisis boiled anew — were mixed, but showed no major fault lines that would contradict the confidence that Henry and other industry executives have expressed.
The reports showed that loss rates generally declined in August while delinquencies ticked up. Both moves were in line with seasonal patterns.
But the pace at which late accounts have been moving to chargeoff has been falling lately, presaging further declines in loss rates in the months ahead. That would extend a dramatic recovery in credit card loan quality that has
In a presentation this month, Capital One Financial Corp. Chief Executive Richard Fairbank attributed the resilience of card portfolios to the facts that many accounts held by the chronically unemployed have already charged off, and large proportions of receivables now outstanding were underwritten according to strict standards implemented during the downturn.
Credit card portfolios are "not showing the signs of shock that you read in the paper," Fairbank said.
The annual chargeoff rate for Capital One's securitized card loans did jump 19 basis points from July, to 3.7% in August, and the portion of its accounts that were 30 to 59 days past due increased 4 basis points, to 0.99%.
But at 4.7% for the second quarter (included loans that do not back bonds), Capital One's chargeoff rate had already crashed through what it views as a "normal" post-recession rate of about 5%.
Among the six biggest credit card lenders, Discover Financial Services notched the greatest improvement.
The chargeoff rate for its securitized receivables fell 23 basis points from July, to 3.6% in August, and the portion of its accounts that were 30 to 59 days past due decreased 2 basis points, to 0.7%.
Moreover, while credit statistics will ultimately run out of room for improvement, Discover could be headed to a chargeoff rate of just 3.2% in the fourth quarter, based on the average rate at which its early-stage delinquencies have translated into chargeoffs five months later from April through August.
At Amex, the chargeoff rate fell 7 basis points from July, to 2.8% in August, and the portion of its accounts that were 30 to 59 days past due fell 1 basis point, to 0.47%.
Henry, the company's chief financial officer, noted that new, "unseasoned" accounts typically charge off in relatively large proportions, but that there has not been much growth in the company's portfolio lately. "I think our assets are in a different place than they were back in 2008," he said.
