Credit Card Losses Top Home, Auto Loans At US Banks

Credit card losses at the biggest banks are outpacing auto and home loans, with the biggest margin seen in the last 10 years, according to Bloomberg. The problem is not yet out of hand, however. Since the economy remains strong and the unemployment rate is low, most consumers can stay current on debt repayment. Even new foreclosures and bankruptcies fell to a level not seen in 15 years.

Credit bureau Experian said some of the blame comes from banks giving cards to risky borrowers, and that there is a spike in late payments from elderly consumers. Matt Komos, TransUnion vice president of financial services research and consulting, said that though the delinquencies are notable, he doesn’t think they spell doom for banks.

“We do see card delinquencies a little higher, and a slight uptick in the most recent couple of quarters,” he said. “Delinquencies, while moving upward, are probably hitting a more normal level for the amount of credit that’s out there.”

The four biggest banks in the country, collectively, “had almost $4 billion in charge-offs from credit cards in the last quarter,” with only $656 million from other loans, the biggest gap since 2009. The charge-offs make up an upward of 80 percent of all “credit costs, up from 67 percent just three years ago.”

Profits are still rising, regardless. JPMorgan Chase said its profits from the consumer division grew 19 percent in Q1.

“For us, the U.S. consumer has always been strong and confident, and even if we’re not at all-time highs in confidence, we’re still very high,” said JPMorgan Chief Financial Officer Marianne Lake in April. “Generally, the data is — even some like [home] and autos that hasn’t necessarily been super strong — looking encouraging.”

As the credit costs increase, many banks are going through a slowdown in card spending due to the delinquencies, which translates to less collected fees from merchants.