By 
By Nupur Anand
NEW YORK (Reuters) – U.S. consumers’ late payments on credit cards and other loans are starting to level off in recent months after rising earlier in the year, bankers and industry analysts said this week.
The trend contrasts with recent data showing a surge in credit card loans being written off across the industry, as some Americans get back on a firmer financial footing.
“Tighter underwriting in the wake of last year’s banking crisis appears to be reaping benefits, as does the slowing in inflation,” said Mark Zandi, chief economist at Moody’s (NYSE:MCO) Analytics.
Delinquency rates across all household liabilities declined to just over 2% in August, compared with about 2.5% in 2019, Zandi said, citing data from Equifax (NYSE:EFX), a consumer reporting agency.
Late payments declined across credit cards, auto loans, personal loans, retail cards and first mortgages in August, the Equifax data showed.
The trend could signal more stable finances for Americans who had fallen behind on payments as their pandemic savings dwindled while living costs climbed.
As their customers’ finances weakened, U.S. lenders’ net charge-off rates for credit cards, or the amount banks did not expect to collect on the loans, rose to 4.82% in the second quarter, according to data from the Federal Deposit Insurance Corporation (FDIC). That was the highest since 2011.
“Delinquencies obviously have picked up, but those are starting to crest over the last quarter or so,” Citigroup Chief Financial Officer Mark Mason told investors at a conference on Monday. “That’s a good sign.”
For months, industry executives have described a divergence in customer finances, noting those with lower incomes and credit scores were struggling more than affluent clients.
Customers with lower credit scores had shifted their spending toward purchases of household staples instead of discretionary items, Mason said.
“We are seeing delinquency flat on the consumer side, which is good news,” Bank of America CEO Brian Moynihan told the same conference.
Consumer delinquencies could be close to peaking if the economy and labor market remain resilient, Zandi said.
Banks tightened lending standards last year as the commercial real estate market deteriorated and investors became broadly concerned about the potential for a U.S. recession.
In recent months, U.S. inflation has slowed, cementing expectations that the Federal Reserve will cut interest rates by at least 25 basis points at its Sept. 17-18 meeting and continue to ease its monetary policy.
The cuts would give some relief to some borrowers whose loans have variable interest rates, because their repayment obligations may come down, said Susan Fahy, executive vice president at VantageScore, a credit score modeling company.
Wells Fargo also expects its net-charge offs on credit cards to decline in the third quarter after remaining slightly elevated in the first half.
In the second quarter, the bank’s credit card net loan charge-offs rose $72 million, versus $57 million in the first quarter.
“Overall consumer is feeling fine,” CFO Michael Santomassimo told investors this week. “We do expect the card charge-off rates slowly come down in the third quarter,” he said.
JPMorgan Chase (NYSE:JPM) President Daniel Pinto said the consumer is “still in a solid place.”
