Credit vs. Crisis

Lots of corporate news today confirms that as credit card delinquencies rise in this sour economy, card issuers are tightening their lending standards.

Here are some of this morning's corporate developments that will affect consumers:

JP Morgan, Chase, which with its purchase of Washington Mutual has become the largest card issuer in the United States, announced that it stayed profitable in the third quarter, but only barely. It doubled its provisions for loan losses in the past year to $3.8 billion, took a big writedown for absorbing WaMu and is still digesting its credit card portfolio.
Wells Fargo also reported third quarter results. It said it has come through the credit crunch just fine so far but is taking steps to keep it that way. It will continue to focus on issuing credit cards to its existing banking customers, so it can keep a closer eye on them and take action when they get into trouble. Wells, which bought out Wachovia last month, said its profit rose 11 percent, topping analysts' estimates, but that it would take steps to minimize the impact of the economic downturn.
Wells executives said in a prerecorded quarterly results announcement this morning that as a result of seeing its credit card delinquencies rise, "We continued to tighten our underwriting standards, which reduced new account growth, but increased the quality of our new customers. We proactively manage our existing accounts, including restricting balance growth and transactions on riskier accounts, lowering and, in some cases, closing credit lines, and for a small percentage of accounts repricing them consistent with the customer’s current risk profile."

Capital One, which announces third quarter earnings tomorrow, announced that it was seeing increased delinquencies, too: In September, it had to write off credit card debt at a rate of 6.34 percent in September, up from 5.96 percent in August. To translate into consumer-speak, that means it turned over more of its customers to debt collectors last month.
For the consumer, all of this means that it's more important than ever they continue to do the basic blocking and tackling of personal finance. Pay all bills on time, every time. With housing prices down, there are fewer of us with home equity to tap, so that means credit cards are more often the last lifeline to credit. Don't give your lender any excuse to chop it, because they're walking around with axes these days.
Update: Capital One piles on. From the Thursday, Oct. 16, conference call transcript (hat tip, Calculated Risk): "We have tightened underwriting standards across the board. In our US card business we have gotten more conservative. We have begun to reduce credit lines. We have continued to tweak our underwriting models and to the recalibrate models this may be unstable. We have adapted our models and approaches as the economic environment has changed and we are intervening judgmentally even more than our models would indicate."