The quality of Canadian credit card portfolios dipped in the second quarter, as charge-off and delinquency rates increased compared to the second quarter of 2002, according to Moody’s Investors Service’s Canadian Credit Card Index.

According to Moody’s, the second quarter charge-off rate rose to 3.15% from 3.07% for the same period in 2002. The delinquency rate rose for the first time following 13 consecutive quarters of year-over-year improvement, increasing to 2.39% from 2.29% one year ago.

“This rise in both the charge-off and delinquency rates comes despite relative economic stability in Canada and the delinquency rate’s long-term trend of improvement, making it difficult to pinpoint the exact cause of the increase,” said Sumant Inamdar, an associate analyst with Moody’s based in Toronto.

Overall job creation in Canada was positive for the six months ended June 30 versus the same period in 2002, Inamdar says. At the same time, non-business bankruptcy filings climbed by 9.1% in the second quarter of 2003 compared to the same period in 2002. “It therefore appears that rising bankruptcy levels may be a driver of this latest rise in the loss and delinquency rates, although we cannot establish a firm link,” said Inamdar. Moody’s is currently doing research on the extent to which personal bankruptcies can impact credit losses in Canada.

In comparison to the Canadian Index, losses in the U.S. Credit Card Index remained high in the second quarter of 2003, with the US delinquency rate falling to 5.20% from 5.48% in the first quarter. While an improvement over the first quarter, this figure was still well above last year’s second quarter rate of 4.94%.

Moody’s Canadian Credit Card Index measures the credit performance of managed portfolios of credit card receivables in the Canadian market including both owned and securitized portfolios. As of June 30, the Index tracked the performance of approximately $34.7 billion worth of receivables in Canada, up 11.4% from the previous year.