December 1, 2006: Credit cards: Taking a swipe

As a part of reviewing the finance sector recently, I intended to learn more about credit card companies and their prospects for 2007. Here is a summary of my findings:


2006 was an excellent year for unsecured credit quality. Delinquencies and chargeoffs below historical levels are good news.

Bankruptcy filings were down 60% in 2006 relative to 2004. Typically, 40% of credit card company losses are due to bankruptcy. The forecast for 2007 is 1.1 million filings for bankruptcy, still below the 2004 level, up from 2006 but not to a large degree.

The underlying macroeconomic environment remains favorable for chargeoffs, as unemployment is expected to remain stable. Portfolio seasoning is positive as industry growth is accelerating.

It is analysts' opinions that major credit card issuers have factored 2007 loss increases into their forecasts.

The following companies might have a place in your portfolio. I believe that now is a good time to consider purchase. Funds may decide to beef up their holdings in these companies to window dress their portfolios in late December.

Capital One (COF) at 77.00 may go near 100....(what's in YOUR wallet?).
Citigroup (C) 49.00
CompuCredit (CCRT) 37.00
JPMorganChase(JPM) 44.75
MasterCard (MA) 101.00 ...this stock has been a surprise performer.