Credit conditions are improving for some of the top card issuers but the effects of new regulations and long-term unemployment will continue to challenge their portfolios' performance.

The three major credit card issuers that have reported second-quarter results — JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. — saw 30-day-plus delinquencies fall year over year and quarter over quarter. Two — B of A and JPMorgan Chase — also experienced sequential declines in chargeoffs, allowing them to release loan-loss reserves. Citi's chargeoffs in its North America self-branded credit card business edged up slightly.

Capital One Financial Corp. and American Express Co., also among the largest issuers, are scheduled to report quarterly results Thursday.

Despite the improved performance, executives said they are cautiously moving ahead with growth plans, focusing on attracting and retaining higher-quality borrowers as they continue to cope with the new restrictions under the Credit Card Accountability, Responsibility and Disclosure Act, which limits issuers' ability to raise interest rates and charge certain fees. Actually increasing card revenue, though, remains a tough task for issuers, who also are contending with consumers who continue to rein in their finances and pay down balances.

JPMorgan Chase said lower average loan balances were partly to blame for a decline in its card services revenue during the quarter. Citi said its average card loans declined 4% quarter over quarter as higher payment rates and fewer accounts offset a 9% increase in purchase volumes.

JPMorgan Chase last week said it now estimates the damage from the CARD Act to net income to be $750 million, which is at the high end of a previous range it provided.

Long-term unemployment, which remains elevated, also could cause improvement in card portfolios to stall. While the percentage of cardholders falling into delinquency has declined for many issuers, extended unemployment has increased the number of those that are charged off, said John Stilmar, an analyst at SunTrust Robinson Humphrey in Atlanta.

"What we've seen through this recession is once a customer enters into the state of deliquency, they are almost 50% more likely to end up in chargeoff than they did previously," he said. With unemployment high, "there aren't as many means for a person to cure defaults." Hence Stilmar said he expects chargeoffs will remain "relatively elevated."

Citi's chargeoff rate for its North America self-branded portfolio in the second quarter was 10.8%, up from 10.7% in the previous quarter and 10.1% a year earlier.

Like its competitors, Citi has focused on improving the quality of its portfolio by "tightening underwriting criteria, closing inactive accounts and decreasing high-risk credit lines," John Gerspach, Citi's chief financial officer, said Friday during a conference call. "As a result, we have seen an improvement in the credit quality of the underlying portfolios."

The company reported $2.05 billion in managed net credit losses for the portfolio, down from $2.08 billion in the previous quarter and $2.06 billion a year earlier.

B of A's global card business, which includes credit and debit card products, saw revenue decline 6% year over year, to $6.9 billion, relatively flat with the previous quarter. The Charlotte company blamed the fall partly on lower interest and fee income resulting from the CARD Act.

However, declining credit costs helped the unit post a net profit of $806 million compared with a net loss of $1.6 billion a year earlier, B of A said. Its provision for credit losses dropped $3.9 billion from the year-earlier quarter on lower delinquencies and bankruptcies.

B of A said its global cards business could lose $1.8 billion to $2.3 billion in annual revenue starting in the third quarter of 2011 from the interchange amendment that is part of the financial regulatory reform bill. The provision gives the Federal Reserve authority to set interchange rates that are "reasonable and proportional." B of A's estimate depends on how the final rule shakes out.

Paul Miller, head of financial institutions research for FBR Capital Markets in Arlington, Va., said that while the interchange provision does not pertain to credit card rates, the regulation will "probably force banks to move people into more credit card transactions" by "charging higher fees for debit cards" to make up for potential revenue losses. That could reverse the trend of consumers using debit instead of credit, he said. Still, "we don't even know what the exact rules are going to be."

Improved loan performance, including lower net chargeoffs and lower estimated future losses, resulted in JPMorgan Chase reducing its loan-loss allowance for cards by $1.5 billion during the quarter. However, net revenue for its card services business fell 13% from a year earlier and 5% from the first quarter, to $4.2 billion. It blamed lower average loan balances and fees.

JPMorgan Chase raised its estimate of the CARD Act's hit to profits partly because of the new late-fee rules the Fed recently issued for the law's third phase, which takes effect in August. JPMorgan Chase said it opened 2.7 million new accounts in the quarter, up from 2.4 million a year earlier. However, it had 88.9 million open accounts, down from 100.3 million.

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