Banks Face Mountain of Plastic

BofA currently holds 20% of credit card-related market share, according to the company's presentation. Managed losses in BofA's $184 billion credit card portfolio accounted for 5.19% of the portfolio in the first quarter, up from 4.75% in the fourth quarter. McGee expects those managed losses to rise to between 5% and 5.5%, citing particularly those customers in areas hard hit by housing like California and Florida. (On a side note, the company says it's on track to close its acquisition of ailing mortgage lender Countrywide Financial(CFC Quote) in the third quarter.)

JPMorgan Chase's first-quarter charge off rate for credit cards was 4.37% and could rise above 5% by the end of the year and to 6% in 2009, causing the company to likely add to its loan loss reserves later this year, Dimon said.

Oppenheimer analyst Meredith Whitney estimates JPMorgan Chase's losses could be around 6% this year and above 6% next year.

[The company] believes that losses in [second half '08] will be mitigated by a higher denominator from a seasonal rise in balances, however we actually believe the opposite will occur," she wrote in a note this week after meeting with the bank's head of card services, Gordon Smith.

Moody's Investor Services on Tuesday issued a negative outlook for the next 12 months for the entire consumer finance industry, which includes credit cards, auto finance, education finance and other consumer lending areas, as recession fears ring true, according to a report.

Credit card asset quality, particularly cards issued to subprime borrowers, "is deteriorating as the economy weakens and ... profitability is pressured by increased provisioning," according to a statement by its co-author Curt Beaudoin. "Industry players are responding with tightened credit, pricing increases, and more rigorous expense management."