Goldman Sachs says credit card issuers to beat loss forecasts

Investing.com -- Goldman Sachs reported that August credit metrics for card issuers showed stable delinquency trends and net charge-offs that performed better than expected, suggesting companies will exceed loss expectations in the third quarter.

Card 30-day-plus delinquencies came in at 3.57%, up 3 basis points month-over-month but below the expected 3.63%. Net charge-offs decreased 12 basis points month-over-month to 4.33%, outperforming long-term expectations of a 6 basis point decline.

Loan growth reached 4.2% year-over-year at the end of the period, improving from 3.9% in July. Month-over-month loan growth of 0.7% exceeded typical seasonal patterns of 0.2%.

Among individual issuers, Bread Financial Holdings (NYSE: BFH) saw delinquencies rise 1 basis point to 5.36%, Synchrony Financial (NYSE: SYF) remained flat at 4.20%, and American Express (NYSE: AXP) held steady at 1.16%. Capital One Financial (NYSE: COF) increased 9 basis points to 3.57%, in line with expectations.

Net charge-offs showed improvement across most issuers. Bread Financial declined 40 basis points to 6.40% and American Express fell 12 basis points to 1.84%. Synchrony remained flat at 4.90%, while Capital One increased 4 basis points to 4.16%.

Quarter-to-date trends suggest net charge-offs are running below seasonal patterns. Goldman Sachs noted that for issuers to meet consensus expectations, losses would need to increase 60 basis points in September versus typical seasonality of 10 basis points, positioning the group for potential outperformance.

Bread Financial stated it expects net charge-offs of approximately 6.50% in the third quarter.

For auto lending, Capital One's 30-day-plus delinquencies rose 14 basis points to 4.54%, while losses increased 18 basis points to 1.66%. Goldman Sachs estimates Ally Financial (NYSE: ALLY) could see losses near 1.90% in the third quarter based on the company's guidance.

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