Credit card portfolios at the country’s major banks showed a rising tide of defaults in August. That pretty much wiped out the hope the July’s numbers, which showed a glimmer of improvement marked any bottom in bad loans for the sector.
Consumers. whose spending accounts for about 2/3 of U.S. economic activity, are clearly still in deep trouble.
Among the big three of credit cards, Bank of America (BAC) reported the highest level of write-offs at 14.54%. That’s up from 13.81% in July. Citigroup’s (C) bad credit card loans rose to 12.14% in August, up from 10.3% in July, and JPMorgan (JPM) saw write-0ffs climb to 8.73% in August from 7.92% in July.
The newest data suggests that July’s improvement in default rates was based on temporary factors rather than a sustained turn for the better in consumer balance sheets. Consumers seemed to have used tax refunds, for example, to pay credit card bills on time.
Moody’s Investors Service has projected that national average credit card write downs will peak at 12% to 13% next year.
Bank of America and Citigroup hit that level in August. Either these banks have bigger problems than most of their peers or the Moody’s projection is optimistic.