Most of the news from top issuers has beenpositive on the charge-off front, at least relatively speaking.According to Federal Reserve data, on average, the top 100 banks’credit card charge-offs were down to 7.65% as of Q4 2010 (downdrastically from the peak of 11.05% in Q2 2010). These issuers havewound down the charge-off rate to roughly Q1 2009 levels.
The glass half-empty view of the world is that before therecession, charge-offs for this group were running around 4%, somajor issuers are still running at about double the “normal” rateof charge-offs. While the progress has been substantial,charge-offs remain a serious drag on the industry.
Smaller issuing banks (according to these statistics) havegenerally fared better and were at 6.73% as of Q4 2010, down fromtheir peak of 8.77%. But even 6.73% is about double their “normal”rates of about 3%. The clean-up continues.
As issuers make their first tentative steps targeting consumersoutside their prime/super-prime comfort range, their appetite fornew credit risk will surely be limited. It is hard to envision abroad-based credit card recovery in terms of new account issuingbefore the charge-off tide recedes further. Continued fast progressin reducing the write-offs of “bads” will be a first indicator ofissuer capacity to seek more “goods.”
