RIVERWOODS, Ill.—Amid reports that subprime auto and mortgage lending delinquencies are creeping up, Discover Financial Services is reporting its loan charge-offs have moved up meaningfully after several years of unusually low losses.
Discover’s loan-loss rate in February topped 3%. It was the first time in five years that Discover's monthly charge-offs hit that level, Crain's Chicago Business reported.
“To be sure, that figure remains more than manageable for Discover and in fact is on the low end of its annual write-offs historically. But Discover has for years been more cautious than many of its peers about the borrowers it approves and has enjoyed lower loan losses as a result. The difference now is that Discover also is enjoying unusually high loan growth. More borrowers are expected to default as a period of what analysts believe are unsustainably low charge-off levels ends. That raises concerns that this time Discover's losses will mirror or even exceed the industry's, as the credit cycle churns,” stated Crain's Chicago Business.