The "Missing Slide": JPM Credit Card Charge-Offs Jump To Four Year High

Tyler Durden's picture

While JPM was quick to provide all the favorable data in its earnings presentation (and not so favorable when it comes to the sharp drop in its markets sales and trading division) one thing was conspicuously missing: the slide on "Mortgage Banking And Card Services" which has traditionally been part of the bank's earnings presentation and was certainly featured prominently last quarter.

Of course, it is possible that JPM simply forgot to include it, or perhaps it did not want to bring attention to a troubling trend: the concerning increase in net credit card charge-offs, which last quarter rose to just shy of $1 billion, and which prompted JPM to report an unexpected increase in credit costs (driven also by JPM's write-down in its student loan portfolio).

So we decided to recreate the chart using data JPM disclosed in its earnings supplement, and which may explain why JPM unexpectedly forgot to add that particular slide. It shows that JPM's net credit card chargeoffs surpassed $1 billion as of June 30, and we the highest going back to March 2013.

As a reminder, in his Q2 commentary while Jamie Dimon was quick to note that "the U.S. consumer remains
healthy,
evidenced in our strong underlying performance in
Consumer & Community Banking", although there was little discussion of this troubling credit cardtrend, with the only commentary on the rising charge offs in the earnings report the following, which did observe a notable increase in loan loss reserve build for the Card segment:

The provision for credit losses was $1.4 billion, an increase of $193 million, driven by higher net charge-offs and a higher
reserve build
. The current quarter reserve build of $425 million included $350 million in Card, $50 million in Business
Banking, and $25 million in Auto, driven by both loan growth and higher loss rates, predominantly in Card.

Why is this notable? Because as we discussed last month using the S&P/Experian Bandcard Default Index, "Credit Card defaults has surged the most since the financial crisis." And incidentally, since then it's only gotten worse with the latest data showing that as of May, the rate of defaults on credit cards have risen to 3.53%, up more than 13% from a year ago.

Is it time to start worrying about the spending capacity of the US consumer?

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Cordeezy's picture

Maybe this is why JPM was down in premarket.  Charge offs in Auto, mortgage, student and credit cards will only get worse as the sub prime aspects of these financial products start to default.  

 

www.escapeamazon.com

Arnold's picture

Default equals deleverage now.
I learned that the other day.

I'm taking a Non GAAP accounting course.
It's hard to follow and looks criminal.
But I've got to stay hip to keep up.
Wut?

Cognitive Dissonance's picture

"Nothing to see here. Move along." - JPM

Xatos's picture

I actually paid off 2 cards this period...

 

*shrug*

vaporland's picture

i'm defaulting on six...

lil dirtball's picture

Let us know how that works out for ya in regards to the rest of your life's expenses - like insurance, or acquiring services like cable/internet.

Are you going to file Chap. 7/11?

Telemakhos's picture

I have a perfect credit record. I have one card, have had it since I was 18, and have never run even a revolving balance. Always paid off in full before the due date.

As a result, I'm not eligible for any decent credit cards. I applied for an airline card with free checked baggage—I fly enough that free checked bags would save me beaucoup. I was turned down; the rejection letter said that I wasn't worthy because I had no evidence of ever paying off a revolving debt.

Fuck the credit card companies. They don't want you to pay off your debt but to incur fees and interest.

eclectic syncretist's picture

That mark to skittle-shitting-unicorns accounting seems to still be working for the criminals running JPM. The remarkable and largely unreported continual decline in client trading volume at the exchanges doesn't matter at all when what passes for money is merely counterfiat printed by your privately owned Central Bank; counterfiat so valued by the politicians that they'll sell out to vacant souls for an embarrassing few pieces of paper.

Stormtrooper's picture

"Is it time to start worrying about the spending capacity of the US consumer?"

The US consumer knows how to deal with this problem.  Just apply for a couple more credit cards that can be used to make payments against previous credit cards and allow themselves to go even deeper in debt.

 

Uncertain T's picture

Money spent on consumer goods is now disappeard.   Is this how the Fed unwinds it's balance sheet? 

GodHelpAmerica's picture

"Healthy US consumer"

Dimon is an agent of the fed.

vaporland's picture

actually, I think it works the other way around...

buzzsaw99's picture

student loans are guaranteed by uncle sam so no problem there.  i'm sure the deadbeats will keep paying the cc even while they default on their student loans. /s

the immaterial has become immaterial.   [/Lord Cutler Beckett]

GodHelpAmerica's picture

Radio ads saying you can walk away with a new car after spending just $37. No questions asked.

The GFC fixed nothing; it only acted to move the moral hazard around to other areas.

Farmerz's picture

Wife's mother lives in NY with her other daughter. Over the past couple years, they have her as primary on a 25k car loan, opened a handful of credit cards for her with various credit limits of a few hundred on dept stores, to 12,500 on a Visa Card. Funny thing is, shes in her 70s, never worked in this country, and has less than a 1000$ a month income. Obviously, nothing in her background was ever checked.

LawsofPhysics's picture

Turns out, in the land of "mark to fantasy" accounting, losses are actually profits paid for by everyone else in society!!!

"Full Faith and Credit"

trueFacts's picture

...the end will come when we see the TV ads for "consolidation loans" to refinance combined student loans and new truck loans

Ban KKiller's picture

Dimon, suddenly a teller of truth or just another lying bank teller?  Oh right. His attorneys and accountants are obedient.

Arnold's picture

Mega bank momentum is not on our side.

Bring back Casey Stengel.
https://www.brainyquote.com/quotes/authors/c/casey_stengel.html

Err...Glass Steagall

eclectic syncretist's picture

Jamie Dimon is a criminal! Lock him up with a tub of sleeping pills.

https://www.youtube.com/watch?v=tAmMqt5Bn-A

nsurf9's picture

At 30%+ interest, I'm surprised the charge-off amount is ten times that amount.

VISA, MasterCard, Discover etc. are among the biggest crimininal SOB scourages on this earth, next to the FED, itself, of course!

 

BocceBaal's picture

Credit card rates rise along with the federal funds rate. The recent increases aren't too big a deal when someone's already paying 15% or more, but might just push a few people into default.

lotsofbubbles's picture

Will central banks pump in more units or will they let "markets" deflate, that's all that matters? 

Hume's picture

Citi's loan provisions were higher too, but their percentage of NCLs and 90 days past due both went down.