2009-02-19 — bloomberg.com
Credit-card defaults may rise beyond 10 percent this year, breaking records and wiping out more than half of annual profit for lenders including Bank of America Corp. and JPMorgan Chase & Co., analysts said.
Citigroup, the largest credit-card company by managed loans, said profit in its global card unit plunged 96 percent in 2008 to $166 million from $4.67 billion a year earlier. Credit losses in the unit rose 53 percent to $5.92 billion and the company more than doubled loss reserves to $3.55 billion.
Bank of America, the second-largest credit-card lender, said its card services unit’s profit declined 85 percent to $521 million last year from $3.59 billion in 2007. Charge-offs rose to $11.4 billion from $8.2 billion the year earlier as 6.18 percent of accounts failed, from 4.79 percent in 2007.
American Express, whose net income slipped 34 percent to $2.63 billion in 2008, blamed rising defaults on having a bigger percentage of small business customers who failed to make payments, Chief Financial Officer Dan Henry said last month. The company also has more cardholders in California and Florida, states especially hard hit by the housing bust, he said.
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