Barclays on U.S. Consumer Finance: May Credit Card Trust Data Preview

Barclays on U.S. Consumer Finance: May Credit Card Trust Data Preview

Barclays analyst says, "Credit card companies will report May credit quality data on Wednesday, June 15. May is normally among the best three months of the year for card delinquencies, so with credit trends still performing better than seasonal forces for most issuers, we anticipate particularly strong trust data this week. Our high-level expectations include:

"Delinquencies: Historically, delinquencies fall a median 11 bps m-o-m in May, but with actual delinquencies coming in significantly lower than seasonal forces would dictate the last several months, we expect delinquencies will again come in better than typical trends. We estimate that U.S. card delinquencies will fall about 10-20 bps m-o-m in May for the issuers in our coverage, with particularly strong performance from Capital One (NYSE: COF) and Discovery Financial (NYSE: DFS) (est. 20 bps improvement in delinquencies for both companies), while we expect American Express (NYSE: AXP) to perform more in-line with seasonal trends (est. 10 bps decline in managed delinquencies) as its credit trends have converged with normalized levels."

"Overall, we like the risk/reward of holding the card stocks into Wednesday's data, but think the positive credit trends are mostly priced in, so upside from strong trust credit data could be limited. However, with the stocks still trading at a reasonable discount to normalized earnings, we continue to see upside potential, particularly for COF, which looks compelling at less than 8.5x estimated normalized EPS."

Other stocks of note: Visa (NYSE: V) and MasteCard (NYSE: MA)

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