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The Zacks Analyst Blog Highlights: Capital One Financial, Synchrony Financial, American Express and Discover Financial Services

Zacks Equity Research
·4 mins read

For Immediate Release

Chicago, IL – September 18, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Capital One Financial Corporation COF, Synchrony Financial SYF, American Express Company AXP and Discover Financial Services DFS.

Here are highlights from Thursday’s Analyst Blog:

Credit Card Defaults Dip on August Forbearance

The rate of U.S. credit card defaults witnessed a declining trend in August 2020 despite the coronavirus-related economic slowdown. Credit card loans are charged off after consumers are delinquent on numerous payments and a bank determines that those loans won't be repaid.

Details

Bank of America’s charge-off rate declined to 2.11% in August from July’s 2.12%, while delinquencies were 1.08% compared with 1.16% in the prior month.

Also, JPMorgan’s delinquency rate improved to 0.95% from the prior month. However, its rate of losses on credit card loans rose 15 basis points (bps) in August to 2.18%. Likewise, Citigroup’s credit card charge-off rate increased in August to 2.73% from 2.42% in July. Nonetheless, its delinquency rate fell 10 bps from the prior month to 1.33%.

Another major credit card issuer, Capital One recorded a fall in both charge off and delinquency rates for the reported month. The company’s charge-off rate declined to 3.74% from 4.82% in July and delinquency rate fell 21 bps to 2.23%.

Further, Synchrony Financial’s adjusted charge-off rate decreased to 4.30% in August from July’s 4.80%, while core delinquencies improved to 2.60% from 2.90% in the prior month.

American Express’ rate of charge-offs was 2.50% in August, down 10 bps from the prior-month level. Its rate of delinquencies was 1.20% compared with 1.40% in July. Further, Discover Financial’s delinquency rate dropped to 1.92% for the reported month from 2.03% in June, while its charge-off rate increased 20 bps sequentially to 3.62% in August.

Our Viewpoint

Just by looking at these figures, it is easy to say that all seems to be well for banks in terms of credit card loan portfolios. But one must remember that these numbers are largely attributable to the payment deferral program. Once it ends, there is a high chance of a rise in delinquency rates.

Also, the country’s economy is still not out of the woods, with unemployment rates remaining at high levels and the chances of faster economic recovery being dim. Hence, the actual impact of economic slowdown is likely to be seen in the latter part of 2020 and in 2021, as customers reassess their financial position and many credit card issuers stop offering forbearance.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.


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Capital One Financial Corporation (COF) : Free Stock Analysis Report
 
American Express Company (AXP) : Free Stock Analysis Report
 
Discover Financial Services (DFS) : Free Stock Analysis Report
 
Synchrony Financial (SYF) : Free Stock Analysis Report
 
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