How much of a basket-case was WaMu? Jamie Dimon says defaults on its credit card portfolio may hit 24% this year. Defaults on JP Morgan’s own portfolio, meanwhile, are climbing toward 10%.
FT: Jamie Dimon, JPMorgan Chase chief executive, warned on Wednesday that loss rates on the credit card loans of Washington Mutual, the troubled bank acquired last year by JPMorgan, could climb to 24 per cent by the year end.
In the past, credit card loss rates have tracked the unemployment rate but that relationship has been breaking down for more troubled credit card portfolios, such as the $25.9bn in WaMu credit card loans.
At the end of the first quarter, 12.63 per cent of the WaMu credit card loans were deemed uncollectable by JPMorgan. The bank estimates that figure could reach 18 to 24 per cent by the end of 2009, depending on economic conditions.
Describing credit cards as JPMorgan’s most challenged business, Mr Dimon said loss rates for the company’s larger $150bn portfolio of Chase credit cards could reach 9 per cent in the third quarter and as much as 10.5 per cent by the end of the year, depending on housing and unemployment trends. That compares with first-quarter charge-off rates of 6.86 per cent on the Chase card portfolio.
For some context, here are two excellent charts from T2 Partners (Whitney Tilson). They’re available on the More Mortgage Meltdown site >
Credit card debt in the grand scheme:
Total expected losses on credit card debt versus other types of debt:
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