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Delinquent consumer loans at record lows on bank balance sheets

Delinquencies on consumer loans have hit another all-time low, according to the American Bankers Assn., which says that is good news for the economy as well as for the balance sheets of the banks that are owed money.

Bank credit-card delinquencies rose slightly but remained well below their historical norm. At the same time, the rate of missed payments fell on personal loans and loans for cars, mobile homes, boats and recreational vehicles. There was sharp improvement in payments on home-equity loans and lines of credit.

The trend reflects several factors, including credit standards that were tightened after the loose lending that created the financial crisis. Another factor is the banks’ progress in writing off uncollectible debts, which removes them from the deliquency equation.

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But James Chessen, chief economist for the banker trade group, said the slow but real improvement in the economy and consumers’ more hard-headed approach to taking on debt have played big roles in the improved picture.

“I think consumers deserve a lot of credit for deleveraging and bringing down their debt,” Chessen said in an interview before the release of the report Thursday.

“What’s more, jobs and income are key drivers of the ability to pay debt – and the job picture has been slowly but steadily improving over the last 18 months.”

The American Bankers Assn. report tallied up consumer loans delinquent by at least one monthly payment that were held in bank portfolios during the third quarter.

A composite ratio of eight installment loan categories fell from 1.76% of all accounts in the second quarter to 1.63% -- a record low that is well under the 15-year average of 2.35%, the group said.

Bank card delinquencies rose from 2.42% of all accounts to 2.55%, well below their 15-year average of 3.84%. They have been bumping up and down for several quarters at levels that are extremely low, Chessen said, making it unlikely that the delinquency rate for plastic will move lower.

US Credit Card Balances Delinquent by 30 Days data by YCharts

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