JPMorgan Defaults May Signal More Record Card-Industry Losses

JPMorgan Defaults May Signal More Record Card-Industry Losses

Oct. 14 (Bloomberg) -- JPMorgan Chase & Co., the biggest U.S. credit-card lender, said the unit’s third-quarter write- offs rose and the company forecast more next year, signaling that the industry’s record losses may have longer to run.

Card write-offs, excluding loans acquired from Washington Mutual Inc., rose to 9.41 percent on an annualized basis, from 8.97 percent in the previous quarter, JPMorgan said in its quarterly earnings statement today. That means September defaults probably increased, said Michael Taiano, an analyst at Sandler O’Neill & Partners LP.

A similar rise at other card issuers would push the industry’s U.S. losses beyond the record 11.49 percent set in August, as measured by Moody’s Investors Service. The nation’s six biggest card issuers, including Bank of America Corp. and Citigroup Inc., are scheduled to release monthly data tomorrow. The companies have blamed the recession and rising joblessness.

“With unemployment ticking higher, you’d expect these losses to get worse before they get better,” said Joseph Mason, a Louisiana State University banking professor and former economist at the Office of the Comptroller of the Currency. “We’re definitely not out of the woods yet.”

JPMorgan’s credit-card division posted a $700 million quarterly loss, its fourth straight, and the deficit may widen to $1 billion in the first period of next year, Chief Executive Jamie Dimon said today on a conference call with analysts. The card unit’s losses for 12 months total $2.29 billion.

The entire company earned $3.59 billion during the third quarter, the most since the subprime mortgage market collapsed in 2007.

Credit-card defaults typically track the U.S. jobless rate, which climbed to 9.8 percent in September, the highest since 1983. Card losses may peak at 12 percent to 13 percent in mid- 2010, Moody’s has said.

‘Big 6’

Bank of America, the second-biggest credit-card lender after JPMorgan, said write-offs rose to 14.54 percent in August, the highest of the “Big 6” issuers that typically report default data on the 15th of each month. Soured loans at New York-based Citigroup, the third-biggest, climbed to 12.14 percent last month.

Credit-card losses for U.S. issuers could total $82.4 billion, almost a quarter of all loans, if write-offs reach 18 percent to 20 percent, the Federal Reserve said May 7 after stress tests on 19 lenders, including Charlotte, North Carolina- based Bank of America.

American Express Co., the only card issuer among the six to report a decline in both defaults and delinquencies for August, is scheduled to post write-off data tomorrow, along with McLean, Virginia-based Capital One Financial Corp. and Discover Financial Services, based in Riverwoods, Illinois.

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