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Wednesday June 13, 6:15 pm Eastern Time
US card loan writeoffs highest in over 4 years-S&P
NEW YORK, June 13 (Reuters) - U.S. credit card issuers wrote off bad loans in April at levels not seen in more than four years, in response to a spike in bankruptcy filings and the sagging economy squeezing consumers' pockets, bond rating agency Standard & Poor's said on Wednesday.
S&P's monthly credit card charge-off index rose 60 basis points to 6.7 percent in April from March's 6.1 percent, the highest loss rate since February 1997. The April charge-off figure was worse than the 6.2 percent peak reached in June 1992 during the last U.S. recession.
The agency said the increase in loss rates was expected, as the slowing economy has hurt consumer confidence and spending.
``The rising unemployment rate, higher fuel prices, poor corporate earnings, and a volatile stock market continue to influence consumer behavior,'' S&P said in a statement.
On a more positive note, S&P said the level of late credit card payments held steady at 5 percent for April compared with March. However, the April delinquency reading was half a percentage point higher than a year earlier.
Bankruptcy Spike Pushes Writeoffs Higher
The increase in bankruptcy filings has been viewed as temporary in reaction to the pending bankruptcy reform legislation, which will make it more difficult for consumers to wipe out their debt. Experts said many people are rushing to file before anticipated tougher measures can take effect.
The number of bankruptcies filed in the first quarter of 2001 showed a significant rise in consumer filings, increasing by 17.5 percent above the same period a year ago.
``It is expected that the spikes in bankruptcy filings will continue to effect losses in May and June,'' S&P said.
Perhaps surprisingly, the rise in bankruptcy filings resulted in higher writeoffs in April for credit card receivables generated by card holders with top credit ratings than those with blemishes in the their credit histories and pay higher interest rates than so-called prime card holders.
For prime card loan portfolios tracked by S&P, about 35 percent to 50 percent of charge-offs in April were a result of bankruptcy-related losses, as the rest of the losses was due to writing off accounts that were past 180 days delinquency.
For portfolios of subprime card holders, bankruptcy-related losses were lower, representing 20 percent to 30 percent of total losses, S&P said.
Citibank Sees Biggest Card Losses in April
The 15 largest credit card trusts tracked by S&P for its card indices reported higher losses, ranging from 10 to 140 basis points, S&P said.
Citibank, Citigroup's (NYSE:C - news) U.S. commercial banking arm, posted the biggest monthly increase in loan writeoffs, up 140 basis points to 5.1 percent.
According to S&P, Citibank attributed the increase to increased bankruptcy losses, a slowdown in economic activity, and the overall deterioration in credit condition.
Other credit card trusts that reported writeoff increases greater than a percentage point in April included those run by Providian Financial Corp. (NYSE:PVN - news), Metris Co. Inc. (NYSE:MXT - news) and Capital One Financial Corp. (NYSE:COF - news).
On the New York Stock Exchange, Citigroup stock closed down 49 cents at $49.89 a share; Providian off 57 cents at $54.29; Metris up one cent at $30.02 and Capital One up 26 cents at $37.55.
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