NEW YORK–A brokerage firm is warning credit card issuers are about to start seeing huge delinquencies and then losses in their portfolios.
Keefe Bruyette & Woods said the coronavirus pandemic and resulting job losses are likely to mean consumers first stop paying their credit card bills, before eventually stopping payments on their car loans and then, when tapped out, their rent or mortgage.
In a new report, the firm, which specializes in financial services, warned “that surging unemployment and soaring delinquencies will take a massive toll on credit card lenders. Four big card companies that, taken together, had been previously expected to generate $12 billion in profit this year are now anticipated to produce more than $3 billion in losses,” Crain’s New York reported.
“There is no question that consumer finance companies will be significantly impacted,” KBW analysts told the company.
According to the analysis, Capital One is thought to be the biggest casualty and is expected to swing to a $1.8 billion loss this year, instead of producing $5.2 billion in profits. Discover Financial and Synchrony Financial each will lose at least half a billion dollars, said KBW, which expects only American Express to remain profitable, though it is likely to earn 62% less than previously thought, Crain’s New York reported.