Bank of America has reported an increase in the number of customers of this financial institution who delay credit card payments.
The net level of write-offs and the level of delinquency on the BA Master Credit Card Trust II credit card showed an increase by the end of August, but at the same time less than the volumes recorded in 2019 shortly before the outbreak of the coronavirus pandemic.
Last month, the net write-off of the trust’s funds was recorded at 2.13%. This indicator is 1.89% higher than the July result, but 2.49% lower than the level observed at the end of August 2019.
The trust’s overdue debt level rose to 1.26% last month. In July, this figure was 1.24%. In August 2019, the level of overdue debt was 1.57%.
The main outstanding accounts receivable of a financial institution at the end of last month amounted to $13.8 billion. This indicator means an insignificant change in credit activity compared to the trends observed in July.
Experts note that until recently, consumers paid mainly with their cards and other loans, and the unfavorable economic situation may cause changes in their behavior.
Write-offs, information about which was contained in the reports of financial institutions, were at an acceptable level until the deterioration of the situation in July. In mid-summer, the six largest banks in the United States reported the highest rates of loan losses since the beginning of the coronavirus pandemic. The negative trend has significantly affected credit card payments.
Andrew Young, Financial Director of Capital One, said in July during the quarterly earnings report of the bank that the situation in the area of lending has a dynamic development in the direction of gradual normalization. Richard Fairbank, CEO of this lender, noted that past write-offs are the raw material for future recoveries. He noted that during the previous three years, the financial institution recorded very low write-offs. According to him, the bank’s recovery indicators will be minimal in the short and medium term.
According to experts, the current rates of lenders’ write-offs may be a signal of approaching problems that will have a wide scale and will become a sensitive factor affecting the state of affairs of financial institutions. According to them, the increase in the number of cases of missing monthly payments by consumers is a sign that this particular scenario of the future is likely to become a reality. This forecast does not coincide with the positive expectations of the management of Capital One.
The current increase in corporate rates by American lenders, which has all the signs of a stable trend with a consistent upward trend, is taking place during an already difficult period for consumers. Bank customers found themselves in a kind of zone of material existence, under pressure from factors such as rising costs against the background of inflation and the continuation of the policy of financial regulators to raise interest rates. At the same time, consumer wages continue to be an indicator that lags behind the development of economic realities. This state of affairs is the reason that the financial capabilities of buyers of goods and services are below the price range offered by manufacturers and suppliers. Also, the reduction of additional benefits has become a factor of pressure on the economic base of the consumer environment.
Experts note that life events, the consequences of which are material damage, including in the form of a sudden increase in costs, should be characterized as a circumstance affecting the personal budget. Even among those consumers who are secured with loans, 16% claim that certain events have caused problems with obtaining new credit lines. The relevant information is contained in the results of a special industry study.
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