Overview
Goldman Sachs' August snapshot of credit-card portfolios found 30-day-plus delinquencies broadly stable and net charge-offs that came in better than the firm had modeled. Taken together with loan growth that outpaced normal seasonal patterns, Goldman concluded the card issuer cohort is positioned to report third-quarter losses below current consensus expectations unless a material deterioration occurs in September.
Key August metrics
Card 30-day-plus delinquencies finished August at 3.57%, a 3 basis-point increase from July, and notably below the 3.63% level that had been expected. Net charge-offs fell by 12 basis points month-over-month to 4.33%, exceeding long-term expectations that had called for a 6 basis-point decline.
On the lending front, balances expanded 4.2% year-over-year at the end of the period, up from 3.9% in July. Month-over-month loan growth registered 0.7%, comfortably above the typical seasonal rise of 0.2%.
Issuer-level developments
Individual card issuers showed mixed readings on delinquencies and losses, but most posted improving net charge-off trends. Bread Financial Holdings (BFH) experienced a 1 basis-point uptick in 30-day-plus delinquencies to 5.36%, while its net charge-offs declined 40 basis points to 6.40%.
Synchrony Financial (SYF) recorded a flat 4.20% for 30-day-plus delinquencies and its net charge-offs remained unchanged at 4.90%. American Express (AXP) held 30-day-plus delinquencies steady at 1.16% while its net charge-offs declined 12 basis points to 1.84%.
Capital One Financial (COF) saw 30-day-plus delinquencies increase 9 basis points to 3.57% in line with expectations, and its net charge-offs edged up 4 basis points to 4.16%.
Quarter-to-date implications
Goldman Sachs highlighted that quarter-to-date net charge-off trends are running below what seasonal patterns would suggest. To align with consensus loss forecasts, the group would need losses to widen by about 60 basis points in September versus a more typical seasonal increase of roughly 10 basis points. That gap, Goldman said, leaves the cohort with room to outperform if September does not bring a significant uptick in losses.
Auto lending note
In the auto portfolio, Capital One reported 30-day-plus delinquencies rose 14 basis points to 4.54%, and losses increased 18 basis points to 1.66%. Based on company guidance, Goldman estimated that Ally Financial (ALLY) could see losses near 1.90% in the third quarter.
Company guidance
Bread Financial reiterated its own expectation for third-quarter net charge-offs at approximately 6.50%.