According to a new report by U.S. investment bank Goldman Sachs (GS), credit card companies are accumulating losses at the fastest pace since the 2008-09 financial crisis.
Credit card losses had bottomed in September 2021 amid ongoing government stimulus measures during the Covid-19 pandemic.
However, losses on consumer credit cards have been rapidly rising since the first quarter of 2022 and are now on pace to match the losses seen in 2008, according to Goldman Sachs.
Losses on credit cards in the U.S. currently stand at 3.63%, up 1.5 percentage points from the 2021 bottom.
Goldman forecasts that credit card losses will rise another 1.3 percentage points to 4.93%. The losses are rising at a time when Americans owe a record $1 trillion U.S. on their credit cards.
The investment bank points out that of the past five credit card loss cycles, three occurred during economic recessions.
Goldman Sachs’ report concludes by saying that credit card issuers Capital One Financial (COF) and Discover Financial Services (DFS) are most vulnerable to the accelerating losses.
The stock of Goldman Sachs is up 11% over the last 12 months and currently trading at $327.89 U.S. per share.
