Credit trends continue to improve

More people are paying their bills on time, according to new data regarding Target’s credit card portfolio. The company disclosed that the percentage of account balances delinquent 30 days or more had declined to 7.94% during March compared with 8.57% the prior month. The percentage of those more seriously past due, with three or more late payments, also declined and now represents 5.63% of accounts compared with 6.11% the prior month. That’s good news as far as financial analysts are concerned because the improvement in payment history suggests the company won’t have less exposure to write-offs in the future.

“Target should be well positioned to restore profitability in the credit operation as delinquencies and charge-offs improve in an economic recovery,” according to William Blair analysts Mark Miller. “We believe the credit business, which represented roughly 7% of net income in 2009, could add several percentage points annually to Target’s reported earnings growth in coming years.”