Credit card companies are witnessing a surge in losses at a rate unseen since the 2008-09 financial crisis, according to a recent report by U.S. investment bank Goldman Sachs (NYSE:GS). The report, published on Monday, indicates that these losses have been steadily increasing since the first quarter of 2022 and are now on track to match the levels seen during the financial crisis.
The losses on consumer credit cards in the U.S. currently stand at 3.63%, up 1.5 percentage points from the bottom noted in September 2021 when government stimulus measures were in place to mitigate the impact of the Covid-19 pandemic. Goldman Sachs predicts that these losses will further rise by another 1.3 percentage points to reach 4.93%.
This escalation comes as Americans owe a record $1 trillion on their credit cards. The investment bank's report highlights that out of the past five credit card loss cycles, three coincided with economic recessions.
The report further identifies Capital One Financial (NYSE:COF) and Discover Financial Services (NYSE:NYSE:DFS) as the credit card issuers most susceptible to these accelerating losses.
Despite this concerning trend, Goldman Sachs' stock has experienced an uptick, rising 11% over the last 12 months and currently trading at $327.89 per share.
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