Credit card trends continued to normalize in February, nearing pre-pandemic levels (NYSE:BFH)
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Credit card figures for February are largely in line with trends seen in recent months, continuing to normalize at a gradual pace, with the exception of Bread Financial (NYSE:BFH).
But the trend of reducing fees and delinquent debt is still there Baird noted that is generally below pre-pandemic levels. “Given the broader financial sell-off, combined with healthy credit quality, we will continue to capitalize on the weakness of Capital One Financial (NYSE:COF) and American Express (NYSE:AXP),,” said analyst David George.
Jefferies noted that accounts receivable fell 1% month-over-month, due to seasonal factors typically seen at this time of year. “The current macro/inflationary environment continues to affect the non-major groups more deeply, while the major groups appear to be stable,” said analyst John Hecht.
Wolfe Research maintains an Disproportionate view of Capital One card issuers (COF), Financial Discovery (NYSE:DFS), Synchronous Finance (NYSE:SYF) and Financial Bread (BFH) after this month’s credit data.
Note that Financial Bread (BFH) is the only credit card issuer with a higher delinquency and net charge ratio than it experienced during the pre-pandemic period in February 2020 as shown in the table below.
“Normalization of delinquency rates continues to exceed seasonality,” said analyst Bill Carcache. “We expect the formation of the delinquent ratio to continue to increase in the coming months before accelerating towards year-end as the effects of last year’s rate hike slow growth further and lead to an increase in increase in the original claims.”
Meanwhile, KBW remains bullish on card issuers overall as “these companies warrant a premium valuation relative to the regional banking space.”
| 2023 | 2022 | 2020 | ||||||
| Company | share | Type | February | January | December | 3 months on average | February | Change bps |
| capital one | COF | illegal | 3.72% | 3.65% | 3.43% | 3.60% | 3.88% | -16 |
| discount | 4.16% | 3.81% | 3.57% | 3.85% | 4.68% | -52 | ||
| American Express | AXP | illegal | 1.10% | 1.00% | 1.00% | 1.03% | 1.60% | -50 |
| discount | 1.40% | 1.50% | 1.20% | 1.37% | 2.60% | -120 | ||
| JP Morgan | NYSE:JPM | illegal | 0.88% | 0.83% | 0.76% | 0.82% | 1.14% | -26 |
| discount | 1.33% | 1.17% | 1.24% | 1.25% | 2.20% | -eighty seven | ||
| synchronized | SYF | illegal | 3.90% | 3.80% | 3.70% | 3.80% | 4.50% | -60 |
| adjusted discount | 4.70% | 4.30% | 3.40% | 4.13% | 5.30% | -60 | ||
| Detect | DFS | illegal | 2.74% | 2.67% | 2.53% | 2.65% | 2.64% | -ten |
| discount | 3.40% | 2.81% | 2.54% | 2.92% | 3.84% | -44 | ||
| financial bread | BFH | illegal | 6.00% | 5.80% | 5.50% | 5.77% | 5.90% | ten |
| discount | 7.80% | 6.70% | 6.70% | 7.07% | 6.80% | 100 | ||
| Citigroup | NYSE:OLD | illegal | 1.12% | 1.04% | 1.01% | 1.06% | 1.58% | -forty six |
| discount | 1.55% | 1.50% | 1.34% | 1.46% | 2.64% | -109 | ||
| american bank | NYSE:NORTH | illegal | 1.14% | 1.09% | 1.03% | 1.09% | 1.58% | -44 |
| discount | 1.61% | 1.50% | 1.43% | 1.51% | 2.55% | -ninety four | ||
| Average delinquency | 2.58% | 2.49% | 2.35% | 2.47% | 2.85% | |||
| Average discount | 3.24% | 2.91% | 2.68% | 2.94% | 3.83% | |||
SA contributor Harrison Schwarz has a cautious view of Capital One (COF) above The probability of default skyrockets in 2023.
