Big banks buck 15-year high in credit card delinquencies

The biggest U.S. banks are reporting lower credit card delinquencies in Q2 even as industry-wide data shows consumer defaults at their highest in 15 years.

The divergence between big-bank credit card portfolios and the broader consumer lending market widened in Q2, with JPMorgan Chase, Bank of America and Citigroup all reporting declining delinquency rates even as industry-wide data shows charge-offs at a 15-year peak.

"The big banks tightened underwriting standards earlier in the cycle and have been shedding riskier exposure to non-prime borrowers, so their portfolios don't reflect the stress building elsewhere," said Hannah Park, a banking analyst at Edgen.

JPMorgan's credit card net charge-off rate fell to 2.8% in Q2 from 3.1% in the prior quarter, while Bank of America's dropped to 2.5% from 2.9%, according to the banks' earnings reports published July 14. Citigroup reported a similar decline to 3.2% from 3.5%. Those improvements contrast with data from the Federal Reserve Bank of New York showing overall credit card delinquency rates at 8.9% — the highest since 2011 — and the American Bankers Association reporting that 3.2% of all credit card accounts were 30 or more days past due in Q1.

The gap between big-bank and industry delinquency metrics has been widening since late 2024, when JPMorgan, Citigroup and Wells Fargo began tightening credit limits and reducing exposure to subprime borrowers. The last time this divergence appeared was in 2019, when big-bank charge-off rates fell below 2.5% while industry-wide delinquencies climbed above 7% — a pattern that preceded a 12% decline in the S&P 500 consumer discretionary sector over the following six months.

The divergence directly shapes bank earnings through provision expenses. JPMorgan set aside $2.1 billion for credit losses in Q2, down from $2.5 billion a year earlier, while Bank of America's provision fell to $1.1 billion from $1.4 billion. Lower provisions boosted net income — JPMorgan reported $14.2 billion, up 8% year over year, while Bank of America earned $6.8 billion, up 6%.

Where the stress is building

Outside the big six banks, the picture is markedly different. Non-bank lenders such as Synchrony Financial and Discover Financial Services — which cater to lower-credit-score borrowers — have reported rising delinquency rates. Synchrony's 30-plus-day delinquency rate reached 4.8% in Q2, up from 4.2% a year earlier, while Discover's stood at 3.9%, up from 3.4%. Private credit markets, which have grown to $1.7 trillion in assets, face their first major test in a higher-for-longer rate environment, according to a recent analysis by the Bank for International Settlements.

The divergence also carries macro implications. Consumer spending accounts for roughly 68% of U.S. GDP, and credit card delinquencies are a leading indicator of household financial stress. If the trend at non-bank lenders continues to deteriorate, it could pressure the Federal Reserve to accelerate rate cuts beyond the 25-basis-point move currently priced for September. OIS markets imply a 62% probability of a cut at the September meeting, with an additional 50 basis points of easing priced in by year-end.

This article is for informational purposes only and does not constitute investment advice.