Card Outlook Positive for Big Issuers

NEW YORK (TheStreet) -- The improvement in credit card delinquency and loss rates for July bodes well for the economy and looks to be a major driver of earnings improvements among the six key domestic card lenders.

Credit Card Loss Rates

According to data from monthly 10-D filings of credit card master trusts provided by SNL Financial, the largest six credit card lenders - by total balance sheet and managed card portfolios - all saw month-over-month improvements in credit card loss rates, and all improved form a year earlier, except for JPMorgan Chase (JPM):

While JPMorgan Chase's 7.95% loss rate in July was slightly higher year-over-year, it was the third best among the group, after Discover Financial (DFS) which had the lowest loss rate of 7.28% and Capital One (COF), which had a credit card loss rate of 7.43%.

Citigroup (C) was the only one of the six that saw an increase in its loss rate from May to June, but also had the greatest month-over-month improvement in July, when its loss rate declined to 9.10%.

Bank of America (BAC) had the highest credit card loss rate over the past year, although its July rate of 11.39% was a vast improvement from the peak loss rate of 14.54% in August 2009.

American Express (AXP) continued to have the lowest loss rate among the group, at 5.43% for July.

Credit Delinquency Rates

Here are the 30+ days delinquency rates for the six largest domestic credit card lenders, with the data again coming from monthly 10-D filings of credit card master trusts provided by SNL Financial:

The group average 30+ days delinquency rate of 4.64% was the lowest since SNL began compiling this data in January 2009.

Rochdale Securities analyst Richard Bove said that while lenders' early efforts to restrict credit for their riskiest customers and eliminate "access to the cash machine," along with pricing increases springing from the Credit Card Accountability Responsibility and Disclosure Act of 2009 have fed improvements, "the consumers are stabilizing their balance sheets on their own."

With household debt having declined during seven of the last eight reported quarters, and with a stronger base of credit card borrowers, Bove thinks the industry's outlook is bright, despite Thursday's lousy unemployment numbers.

Mark Tepper, the president of Strategic Wealth Partners in Seven Hills, Ohio, agreed that credit card loss and delinquency rates were bound to continue improving, saying "any excess income people have is going toward paying down that credit card debt," but adding that the lack of discretionary income available for purchases would hurt retailers, hotels, restaurants, etc.