Jefferies predicts mixed credit card issuer performance in February's lending results

Investing.com – Jefferies analysts expect credit card issuers to report mixed February credit performance, with net charge-offs possibly increasing month-over-month, while delinquency rates are expected to improve, consistent with typical seasonal trends for the month.

Some credit card issuers, including Bread Financial Holdings and Synchrony Financial, may release their February management portfolio and main trust data early due to industry conferences held on Tuesday and Wednesday.

For American Express, Jefferies forecasts its management portfolio’s monthly net charge-off rate for February at 2.15%, with a delinquency rate of 1.40%. This indicates a 25 basis point increase in net charge-offs month-over-month, while the delinquency rate remains flat. Year-over-year, net charge-offs are expected to decrease by 35 basis points, compared to a 40 basis point decline last month. The company’s net charge-off and delinquency rates are still slightly above pre-pandemic historical averages of 1.84% and 1.24%. Loan growth is expected to increase by 8.4% year-over-year, slightly lower than last month’s 8.7%.

Jefferies expects Bread Financial Holdings to report a February management portfolio net charge-off rate of 6.98%, with a delinquency rate of 5.87%. This represents a 12 basis point improvement in net charge-offs and a 3 basis point improvement in delinquencies month-over-month. Year-over-year, net charge-offs are forecasted to decrease by 162 basis points, accelerating from last month’s 70 basis point improvement. The delinquency rate is also expected to decline by 33 basis points year-over-year, faster than last month’s 20 basis point decrease. Both net charge-off and delinquency rates remain above pre-pandemic averages of 5.6% and 5.0%. Loan growth is projected to decline by 0.7% year-over-year, compared to a 0.1% increase last month.

For Capital One Financial, Jefferies predicts a February management portfolio net charge-off rate of 5.19%, with a delinquency rate of 3.93%. Month-over-month, net charge-offs are expected to rise by 15 basis points, while delinquencies decrease by 12 basis points. Year-over-year, net charge-offs are forecasted to decrease by 103 basis points, accelerating from last month’s 82 basis point improvement, and delinquencies are expected to decline by 30 basis points, faster than last month’s 27 basis point decrease. The company’s net charge-off rate has been fluctuating near its pre-pandemic average of 4.94%, while the delinquency rate is approaching its pre-pandemic average of 3.70%. Loan growth is expected to increase by 1.7% year-over-year, slightly lower than last month’s 1.9%.

Jefferies expects Synchrony Financial to report a February management portfolio net charge-off rate of 5.34%, with a delinquency rate of 4.62%. Month-over-month, net charge-offs are forecasted to rise by 64 basis points, and delinquencies by 2 basis points. Year-over-year, net charge-offs are expected to decrease by 146 basis points, slightly slower than last month’s 150 basis point decline, while the delinquency rate is forecasted to decrease by 8 basis points, compared to last month’s 10 basis point decrease. The net charge-off rate has been fluctuating near its pre-pandemic level of 5.13%, while the delinquency rate remains slightly above the pre-pandemic average of 4.32%. Loan growth is expected to decline by 0.5% year-over-year, similar to last month’s results.

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