In the dark days of 2008 and 2o09 after the credit bubble burst, it seemed like the United States was drowning in debt defaults and delinquencies and might not come back for air.
Data coming out of Wall Street banks now, however, tells us that isn’t the case.
So far, JP Morgan, Citigroup and Bank of America have reported their first quarter earnings. Across the board, whether the banks have posted gains or losses, one thing remains consistent — the credit quality of the American consumer is improving. We are paying down our debts.
At Bank of America, nonperforming loans, leases and foreclosed properties are down are to $US17.3 billion from $US22.8 billion at the same time last year. Net charge offs — or loans that the bank thinks that it’s unlikely to collect — are down to $US1.4 billion from $US2.5 billion at the same time in 2013.
At Citigroup, this chart below says it all. After the financial crisis the bank created an entity called Citi Holdings — it’s full of all the disgusting securities, loans, and other financial garbage that the bank wants to unload or restructure.
Here’s how Citi Holdings’ North American mortgage delinquencies are doing:
And it’s not just mortgages at Citi. Credit costs at the bank have lowered to $US840 million from $US1.04 billion in Q4 2013. According to the bank those costs are being driven down by an improvement by healthier credit cards.
The bank also had to use less of its cash reserves to offset losses in this quarter than it did in Q1 2013 — $US269 million as opposed to $US370 million.
Over at JP Morgan (and all over Wall Street) mortgage production volume is down dramatically — 68% year over year. At the same time, though, mortgage production losses are down a whopping $US485 million from this time last year to $US58 million, showing that Americans are getting better at being able to pay their bills. Simple as that.
In fact, JP Morgan reported in its Q1 2014 earnings release that delinquencies are down across a bunch of sectors.
What’s really cool about all of this is that it’s all happening while consumer credit is expanding. Numbers from the Federal Reserve in December and January have consistently blown past analyst expectations. The latest numbers (from February but released this month) show an expansion of $US16.48 billion, when analysts expected $US14.0 billion.
So the Federal Reserve is saying Americans are taking out loans, and Wall Street banks are saying that Americans are paying them back.
This is the way it should people, people.
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