Is This What Recovery Looks Like?

The demise of the credit card crisis has been greatly exaggerated… here’s one for those recovery cheerleaders:

Bank of America and Citigroup — which comprise 35% of the entire credit card industry — announced this week that customers are defaulting on their credit cards at the highest rates since the recession began. Bank of America’s charge-off rate registered a whopping 14.5% in August. In other words, for every $7 in credit card debt on BoA’s books, they expect to lose $1.

Other mega-banks and creditors like JP Morgan, Discover, Amex and Capital One revealed similar August numbers. It’s an extra-harsh dose of reality for the Street, which enjoyed improving credit default rates this summer, especially in July. We’re a bit less surprised… nearly every measure of loan losses at U.S. banks are still soaring into record territory:

US Loan Defaults

This is a component of our thesis at Agora Financial — that while the credit fallout has been cruel, it has yet to equal the size and scope of the credit bubble that preceded it. We still have quite a mess ahead of us.