) -- After factoring-in the average yield on credit card portfolios and loan loss rates,

American Express

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Discover Financial

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have the best net portfolio yields on their card businesses, according to a data study by SNL Financial.

SNL's data shows that over the past year, credit card loss rates for all six major card lenders have declined, with American Express maintaining its status of having the lowest annualized loss rate of 4.24% in February, followed by

Capital One Financial

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at 5.18%; Discover, at 5.79%;

JPMorgan Chase

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, at 6.21%;


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, at 7.95%; and

Bank of America

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, bringing up the rear with the highest annualized credit card loss rate of 8.85%.

More importantly, despite a lowering of fee income from regulatory changes and lower gross yields on credit card portfolios as exhausted borrowers pay down their balances and delinquent balances are excised, the improving credit quality has made the overall business more profitable.

The net portfolio yield is the average trust portfolio yield, less the annualized loss rate. American Express led with a net portfolio yield of 17.88%; followed by Discover Financial, in a close second place with a net portfolio yield of 17.49%. Next was Bank of America, at 15.10%; followed by Capital One at 13.39%, JPMorgan at 12.53%; and Citigroup, bringing up the rear, at 11.60%.

Interestingly, the improvement in credit quality led to an improvement in the net portfolio yield for the entire group, except for American Express, which saw its net yield decline from 21.05% in February 2010.

Most Improved Net Portfolio Yield: Bank of America

The card lender with the most improvement year-over-year in its net portfolio yield was Bank of America, improving from 10.94% in February 2010.

SNL Financial analyst Sam Carr told


that "gross yields are slightly down, but with the credit quality improvement, net yields are higher, as these companies are managing their portfolios better." The analyst also said that credit card lenders were "seeing higher payment rates and lower revolving debit."

CARD Act and Capital One

Carr added that "Capital one is seeing a reduction in penalty fees, as a result of the CARD act," referring to the Credit Card Accountability Responsibility and Disclosure Act, signed into law by President Obama in May 2009. The CARD act included several measures designed to help credit card borrowers avoid fees and lower the amount of interest charged, including mandating that bills be mailed out at least 21 days before the payment due date, and requiring lenders to apply borrowers' payments to higher-rate balances first.

Carr also said that for Capital One, "a lower number of customer accounts is affecting annual fees," and that the company had addressed changes in the business by reducing "their levels of loans with low introductory promotional rates."

Delinquencies are a forward indicator of the industry's direction, and during February, the past year's positive trend continued, with the percentage of card balances delinquent 30 days or more declining month-to-month for all six large card lenders, save American Express, where delinquencies were up slightly, to 2.18% of managed card receivables, although that was, by far, the lowest delinquency rate for the group.

JPMorgan's February delinquency rate within its managed credit card portfolio was 3.29%, followed by 3.70% for Discover, 3.98% for Capital One, 4.34% for Citigroup (which reports delinquencies of 35+ days), and 5.09% for Bank of America.


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Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.