Jefferies analysts anticipate a divided set of credit signals from U.S. card issuers for February, with net charge-offs likely rising on a month-over-month basis even as delinquencies show modest improvement. The firm says this pattern is in keeping with customary seasonal behavior for the month.
Jefferies also flagged that a subset of issuers - including Bread Financial Holdings and Synchrony Financial - might publish February managed and master trust statistics earlier than peers because of industry conferences scheduled on Tuesday and Wednesday. That timing could affect the flow of data and near-term market expectations.
Company-level forecasts
For American Express, Jefferies projects February monthly net charge-offs of 2.15% and delinquencies of 1.40% within the managed portfolio. The firm’s forecast implies a 25 basis point month-over-month increase in net charge-offs while delinquencies are forecast to be flat. On a year-over-year basis, net charge-offs are expected to be down 35 basis points, a slightly smaller improvement than the prior month’s 40 basis point decline. Jefferies notes American Express’s net charge-off and delinquency rates remain slightly above their historical pre-pandemic averages of 1.84% and 1.24% respectively. Loan growth at the company is forecast at 8.4% year-over-year, modestly below the prior month’s 8.7%.
Bread Financial Holdings is forecast to report February monthly net charge-offs of 6.98% and delinquencies of 5.87% in its managed portfolio. Jefferies’ view represents month-over-month improvements of 12 basis points in net charge-offs and 3 basis points in delinquencies. Relative to the prior year, net charge-offs are expected to be down 162 basis points, an acceleration from the prior month’s 70 basis point improvement. Delinquencies are forecast to fall 33 basis points year-over-year, also accelerating from the prior month’s 20 basis point decrease. Despite those year-over-year improvements, Bread’s net charge-off and delinquency rates remain above the stated pre-pandemic averages of 5.6% and 5.0%. Loan growth is forecast to be down 0.7% year-over-year, versus a 0.1% increase the previous month.
For Capital One Financial, Jefferies expects February managed portfolio net charge-offs of 5.19% and delinquencies of 3.93%. Those figures imply a 15 basis point month-over-month rise in net charge-offs and a 12 basis point month-over-month decline in delinquencies. On a year-over-year basis, net charge-offs are forecast to be down 103 basis points, an acceleration compared with the prior month’s 82 basis point improvement. Delinquencies are expected to decrease 30 basis points year-over-year, also an acceleration from the prior month’s 27 basis point decline. Jefferies notes Capital One’s net charge-off rate is moving near its pre-pandemic average of 4.94%, while the delinquency rate is approaching its pre-pandemic average of 3.70%. Loan growth is forecast at 1.7% year-over-year, compared with 1.9% in the prior month.
Synchrony Financial is expected to report February net charge-offs of 5.34% and delinquencies of 4.62% in the managed portfolio, according to Jefferies. Month-over-month this equates to a 64 basis point rise in net charge-offs and a 2 basis point increase in delinquencies. Year-over-year, net charge-offs are forecast to be down 146 basis points, a slight pullback from the prior month’s 150 basis point decrease, while delinquencies are expected to decline 8 basis points year-over-year, a deceleration from the prior month’s 10 basis point decline. Jefferies observes Synchrony’s net charge-off rate is trending near the pre-pandemic level of 5.13% while delinquencies remain modestly above the pre-pandemic average of 4.32%. Loan growth is expected to be down 0.5% year-over-year, consistent with the prior month.
Implications
Jefferies’ forecasts point to a nuanced picture of consumer credit performance across issuers. Net charge-offs climbing on a monthly basis but easing on a year-over-year basis in several cases suggests an environment with ongoing asset quality improvements versus the prior year while still exhibiting short-term seasonality pressure. The timing of some firms’ data releases could also shape near-term headlines and investor reactions.