The Prospects for Credit Losses are Improving

The prospects for credit losses are improving over the summer, with the credit card delinquency rates at most major U.S. card issuers(including Bank of America Corp and JPMorgan Chase & Co),fell last month, which seems that the recession of Americans are starting to go away. However, uncollectible loans were still high which created the downside of credit losses. And for many lenders, the credit losses even go up from a year earlier. According to regulatory filings by the companies on Thursday, this is condition become even worsen to JPMorgan, Capital One Financial Corp and American Express Co. Anyway, with the drop of delinquencies, there are fewer consumers late on their bills, which gives future loan performance great confidence.


Michael Taiano, who is an analyst at Sandler O'Neill, said that the card companies were around the corner. The credit losses are reaching their culmination or start to reach culmination. And the question is how soon they will come down, while the trend is down anyway. Once delinquencies stop growing, the credit losses tend to churn through the bad ones pretty quickly, because for the most part, the credit cards are short-term loans.

JPMorgan modified its previously gloomy outlook on credit cards, when reported robust first-quarter earnings on Wednesday, which again reinforced the card business' hopes.

Analysts had expected that More consumers can put the cash comes from tax refunds toward paying down debt, so delinquency rate will be improved during special seasonal, including tax season. The banks cut the unit's reserve for loan losses and said it had trimmed the loss expectations for its credit card business.

The economy conditions should always be taken into consider when improving the credit card companies losses. The consumer demand increasing, signaling comes from the highest rate of the businesses boosted inventories since July 2008,in February. The retail sales also jumped in March. Though there is a relatively slow-paced economic recovery as the economic reports on Thursday.