Major credit card players seeing continued improvement included American Express, with the lowest charge-off rate — uncollected debts from consumers — of 2.25 percent in January, improving from 2.28 percent in December.
World Financial Network — a subsidiary of Alliance Data Systems — had the highest charge-off rate of 6.07 percent, improving from 6.39 percent in December.
Bank of America saw its January credit card charge-off rate decline to 5.63 percent from 6.05 percent in December.
Discover’s charge-off rate declined to 2.75 percent in January, from 3.15 percent the previous month.
Major card securitizers seeing increased January charge-off rates included Capital One, with a 3.54 percent charge-off rate, compared to 3.43 percent in December; JPMorgan Chase’s Chase Issuance Trust, with a charge-off rate of 4.25 percent, increasing from 4.11 percent in December; and Citigroup subsidiary Citibank, with a charge-off rate of 5.27 percent, increasing from 5.11 percent the previous month.
Discover’s shares have returned 21 percent year-to-date, through Wednesday’s close at $29.01. The shares trade for nine times the consensus fiscal 2012 earnings estimate of $3.36 a share, among analysts polled by Thomson Reuters.
The company reported a return on average equity (ROE) of 30 percent for its fiscal 2011, ended Nov. 30.
Sakrhani reiterated his “outperform” rating for Discover, with a $32 price target.
Sakrhrani is ahead of the consensus, estimating that that Discover will earn 43.48 a share during fiscal 2012, although his $3.10 EPS estimate for fiscal 2013 is behind the consensus estimate of $3.37.
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