Consumer credit is starting to fray at the edges.
Lenders and credit-ratings firms are warning that credit cards, auto loans and student loans are weakening, suggesting that a new round of borrower delinquencies and losses for financial institutions could be on the way.
Synchrony Financial, the largest U.S. issuer of retail-store credit cards, increased its forecast for credit losses over the next year, saying some customers were failing to catch up on overdue payments. The increase in expected losses wasn’t huge — 0.2 to 0.3 percentage point — but it rattled investors who are nervously watching for a peak in the credit cycle.
Synchrony’s stock fell 13%. Shares of Capital One Financial Corp., another credit-card issuer, fell 6.6%, and Ally Financial Inc.’s dropped 5.6%.
Read the full article here.