Credit Card Net Charge-Offs Will Rise, but We Still See Opportunity Among the Card Issuers

Many of the credit card-focused firms under our coverage have developed deep discounts to our fair value estimates as concerns about rising credit costs have been aggravated by recent turmoil in the banking sector following the failure of Silicon Valley Bank. While the market has gone too far in discounting many of these names, the concern is not entirely unwarranted. Rising interest rates, debt levels, and shelter costs have increased financial pressure on consumers as a larger portion of their income becomes tied up in servicing financial obligations, and we expect this pressure to continue to build in the near term.