Updated from 11:53 a.m. EDT

Capital One Financial

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shares were falling after the lender said loans written off in its U.S. credit card business rose nearly 1 percentage point in May from a month earlier.

The McLean, Va., company said its annualized net charge-off rate for domestic cards last month was 9.41% on a $65 billion portfolio, up 85 basis points from April. On the other hand, loans that were behind in payment by at least 30 days totaled 4.90% of the portfolio, an improvement of 14 basis points compared to April.

Capital One is experiencing pain similar to other big credit card lenders, including

American Express

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Bank of America

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JPMorgan Chase

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, as the credit environment has soured. The company has been in the process of pulling back on loan growth.

Capital One said that the card charge-off rate was actually an improvement of 50 basis points due to changes made in the way the company processes bankruptcy proceedings. Initially, the firm moved to charge off loans to customers that entered bankruptcy within two to three days of receiving notification, but because bankruptcies have increased due to the financial crisis, the company changed its practice to fit more in line with internal guidelines to charge off the loans within 30 days.

Capital One said that charge-offs on its $20 billion auto finance portfolio declined by 16 basis points to 4.62%, yet delinquencies rose by 78 basis points to 8.59%.

Charge-offs in its international card business, the smallest portfolio at $8 billion, rose 86 basis points to 9.77%.

Fox-Pitt Kelton Cochran Caronia Waller analyst Bill Carcache became more positive on the financial firm and raised his earnings estimates.

Carcache now predicts the firm will post a loss of $2.53 a share this year, 48 cents less than his original estimate. He also estimates that the company will post a profit of 69 cents in 2010, up 39 cents.

Even though delinquencies deteriorated in auto finance and international lending segments, "they signal the third consecutive month of improvement in U.S. Card," he wrote in a research note. "Although credit deterioration remains a concern, we are raising our estimates to reflect a slower than expected overall rate of deterioration for national lending as a whole."

Capital One shares fell 1.9% to $23.49.

Meanwhile, American Express said charge-offs in its U.S. card services portfolio totaled 10% last month on a managed basis, down sparingly from April. The $55 billion portfolio's 30-day delinquencies fell to 4.7% from 4.9% in April, according to a filing with the

Securities and Exchange Commission


Still, the slightly improved charge-offs in May were due to the company's ability to sell certain cardmember loans that were previously written off, reflecting a partial recovery, American Express said.

Charge-offs in

Discover Financial Services'

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securitized portfolios totaled 8.26% last month, up 65 basis points from April, according to Fox-Pitt Kelton.

Delinquencies at least 30 days late on the other hand, fell 16 basis points to 5.31%, the firm said.

The company is expected to report quarterly earnings on June 18.