AS BAD AS things are in the financial sector, America’s credit-card companies may not have seen the half of it. More and more consumers are falling behind on their monthly card payments as unemployment rises. This trend is expected to grow until 2010.
“We’re looking for a pretty material deterioration through 2009,” says Donald Fandetti, a specialty-finance analyst at Citigroup.
Charge-offs of bad card debt, or losses, have risen to an annualized 6.6% of balances from 4.6% a year ago and may keep climbing until 2010, when unemployment is expected to peak, according to Fandetti and others. With the housing market in decline and the economy contracting, the charge-off rate is almost sure to exceed the historical high of 7.5% — and many in the business are bracing for double-digits.
All of which is good reason for investors to be wary of the group, despite low valuations on the stocks.
The industry’s most prominent members are American Express (AXP); Bank of America (BAC); Citigroup (C); Capital One Financial (COF); Discover Financial Services (DFS); and JPMorgan Chase (JPM).
My encouragement, BE WARY of buying to much of these guys for a little while longer. If you have to own financials, look at BB&T and Wells Fargo. Again, this is only a recommendation and not a true order to buy! HAHAHAHA! Move slowly and look at their numbers!
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