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Citigroup Credit Card Charge-Offs Higher Than Some Peers

The credit card companies are out with data on May credit card charge-offs, which shows a mixed bag among the different players in the industry.

Take Capital One, the credit card company, for starters. In a Securities and Exchange Commission (SEC) filing followed by SeekingAlpha, it said May credit card charge-offs declined to 5.23 percent from 5.33 percent in April. Meanwhile credit card delinquencies fell to 3.47 percent during May from 3.51 percent. Auto charge-offs also decreased at the credit card company to 1.41 percent from 1.93 percent during May. Delinquencies increased to 5.47 percent from 5.15 percent.

Meanwhile Bank of America (BoA), according to SeekingAlpha, reported May credit card write-offs of 2.77 percent, marking a seven basis point increase from April. Delinquencies, however, declined to 1.52 percent from 1.57 percent last month. Citigroup also reported an increase in credit card write-offs in the month of May of 2.94 percent, which SeekingAlpha said was 60 basis points higher than April. Credit card delinquencies fell two basis points to 1.5 percent during May. SeekingAlpha said the increase in charge-offs was notable for Citigroup given its peers aren’t experiencing a similar thing.

Earlier this month, Moody’s Investors Service reported credit card charge-offs — debts that are so delinquent that lending institutions have basically given up on collecting them — are at their highest rate since 2009, possibly due to loosening lending standards. Warren Kornfeld, a senior vice president at Moody’s, wasn’t surprised by the increase in charge-offs — but not because of underwriting quality. Kornfeld explained it quite simply: Credit card debt is lucrative for many financial institutions. With $1 trillion of credit card debt across American households, it’s only logical that companies would try to grow profits by collecting interest on consumers’ bad debt. Still, Kornfeld didn’t deny that underwriting quality has slipped.

In the years following the recession, companies avoided charge-offs due to strong underwriting and an improving economy. Now that the economy is solid, underwriting quality does not need to meet as high a standard.

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