The quickest way to pay top dollar for something you don't need is to make an impulse buy on your credit card. Investors eyeing shares in credit-card companies as a quick way to profit from an economic recovery should also resist the temptation to buy right now.
A growing feeling that stand-alone credit-card lenders will weather the economic slowdown has started to lift shares in firms like American Express Co., Discover Financial Services and Capital One Financial Corp.
But recent credit-card data indicate that none of the big card companies -- including the large card units at banks like Bank of America Corp., Citigroup Inc. and J.P. Morgan Chase & Co. -- are in the clear. Rising defaults could weigh on earnings for longer than expected.
Since the credit crisis began, investors have expected rising charge-offs -- the term given for losses caused by defaults -- at credit-card companies. Two big negatives were identified: Job losses and, for many borrowers, a sharply reduced ability to use home-equity loans to pay off more expensive card balances.
Credit did deteriorate. Moody's Investors Service reports that, for the card lenders it tracks, the annualized charge-off rate -- which measures defaults as a percentage of loans outstanding -- rose to 6.05% in March from 4.64% a year earlier. The charge-off rate peaked at just over 7% during the 1991 and 2001 recessions, according to Moody's.
Credit-card bulls -- believing that a recession may be avoided -- think charge-offs won't go to recession highs. If so, firms like Capital One could look forward to sharply higher earnings as lower defaults would allow lenders to ease off on the expense of building their loan-loss reserves.
But two key data points indicate defaults climbing higher, not falling fast.
First, card borrowers are starting to pay back less of their outstanding balances each month. Analysts at Oppenheimer & Co. say that a sustained decline in the amount borrowers repay each month, compared with a year-earlier, can be a leading indicator that borrowers will start to fall behind on payments.
Oppenheimer calculates that, for the companies it covers, borrowers paid back 19% of their balance on average in April, down from 19.7% in the year-earlier period. American Express's borrowers paid down 23.8% of their balances in April, down from 25% a year ago, according to Oppenheimer. Conversely, Capital One borrowers paid down 18.5% of their balances last month, up from 17.6% a year earlier.
Also worrisome are data from Moody's suggesting that borrowers are finding it harder to become current on credit-card loans once they fall behind. The ratings firm notes that the amount of loans on which borrowers have skipped three or more payments has started to rise more quickly than loans that have missed one or two. Once borrowers are three payments behind, fewer of them ever catch up.
Federal Reserve data say revolving credit outstanding -- which tracks credit-card balances -- increased 6.7% in the first quarter, compared with the year-earlier period. Borrowers are taking on more debt to support spending through the slowdown. It's a gamble for card companies to lend more to people who are turning to relatively expensive debt because they're cash strapped.
And it's a bad bet for investors to load up on the card companies taking that gamble.
Envious EADS Should
Clean Own House First
When the chief executive of Italian defense contractor Finmeccanica said there could be a rival bidder for DRS Technologies, everyone knew he was talking about EADS, also known as European Aeronautic Defence & Space Co.
They knew and they didn't like it. Investors quickly sold off shares in EADS, the maker of Airbus jets. Though the stock recovered, it was clear that investors are worried that EADS might make a mess of the acquisition of the American defense contractor.
The biggest issue for EADS is that it already has a lot on its plate. After all, EADS has found it hard to pull existing assets together successfully. Management is struggling to get Airbus back on track after cost overruns and delays with its new jetliners.
Indeed, worries about Airbus might be why EADS is considering a bid. EADS shares are down by a fourth over the past year, in part because of operational problems at Airbus and because of worries about the commercial aircraft industry. Buying a defense contractor would lower EADS's exposure to that industry.
If EADS is envious of Finmeccanica, or other big defense consolidators, it should clean up its own house before it goes shopping.
越来越多的人认为，单纯从事信用卡贷款的公司能够经得住经济增长放缓的考验。这种人气开始提振美国运通公司(American Express Co.) 、Discover Financial Services和Capital One Financial Corp.等公司的股价。
但是最近的信用卡数据显示，在包括美国银行(Bank of America Corp.)、花旗集团(Citigroup Inc.)和摩根大通公司(JPMorgan Chase & Co.)的信用卡子公司在内的大型信用卡公司中，没有一家在信用危机中安然无恙。不断上升的违约率对公司收益的负面影响可能要比人们预期的时间更长。
人们的信用水平也在下降。穆迪投资者服务公司(Moody's Investors Service Inc.)报告显示，在它所跟踪的信用卡放贷机构中，3月份坏帐冲销率折合成年率－－即所发放贷款的违约率－－上升至6.05%，上年同期为4.64%。据穆迪的数据，在1991年和2001年的经济衰退期间，坏帐冲销率达到了略高于7%的高点。
首先，信用卡借款者每月实际偿还的金额不断减少。Oppenheimer & Co.的分析师表示，借款人每月还款数额较上年同期持续减少可被看作借款人开始拖延还款的领先信号。
当意大利国防承包商器械工业投资公司(Finmeccanica S.p.A)首席执行长表示，DRS Technologies可能还有其他竞购者时，大家都明白他说的是欧洲航空防务航天公司(European Aeronautic, Defense & Space Co., 简称EADS)。