U.S. credit card defaults up less than expected, uncertain to continue

July 15, 2009 by · Leave a Comment
Filed under: Economic News 

At this point you have to take a “wait & see” approach to this development.  In the last 6 months I have noticed a few statistics like existing home sales that for one month improved dramatically in a previous month, just so the statistic would crash the next month.   I hope we are seeing a real recovery but until the unemployment numbers start going down consistently month over month, I am not going to signal any sort of opinion that would suggest that is what is happening in the economy today.   I am watching the banks earnings numbers to see what they might tell us about the current situation and the guidance or lack there of going forward.

News (Reuters):

Two of the biggest U.S. credit card companies, Capital One Financial Corp and Discover Financial Services, reported lower-than-expected defaults and delinquencies in June, sending their shares sharply higher.

The reports may signal that American consumers’ credit positions are not deteriorating as rapidly as feared, despite rising unemployment and the continuing housing slump. The U.S. savings rate has been increasing, which may help.

“A lot of the weaker customer base has already charged off,” said Sanjay Sakhrani, an analyst at KBW. “You have a better core portfolio. But that is not to say that portfolio is not immune from what is going to be a weaker macro economic backdrop.”

Credit card chargeoffs — loans the companies do not expect to be repaid — remain on track to reach record highs before peaking around the end of 2009 or in early 2010.

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