U.S. credit card companies said defaults fell more than expected in October, but delinquencies mostly rose in a sign that consumers remain under stress and the sector can expect more pain ahead.

The drop in defaults reflected a decline in late payments earlier this year thanks to tax refunds and economic stimulus actions. Shares of American Express , the largest U.S. credit card company by purchases, rose nearly 4 percent to their highest level in 15 months.

But delinquencies, late payments that can indicate future credit losses, generally rose as more Americans lost their jobs. Capital One Financial Corp and JPMorgan Chase & Co reported the biggest increases in late payments.

We view this month's numbers as a sign that credit could be coming under greater stress, Barclays Capital analyst Bruce Harting wrote in a note to clients.

Credit card charge-offs and delinquencies usually track unemployment, which rose to a 26-1/2-year high of 10.2 percent in October.

American Express Co said in a regulatory filing that its charge-off rate -- loans the company does not expect to be repaid -- fell to 7.8 percent in October from 8.4 percent in September.

Bank of America Corp , the largest U.S. bank, said that its charge-off rate fell to 13.22 percent in October from 14.25 percent in September. However, the bank is still the credit card issuer with higher defaults and delinquencies.

JPMorgan, the largest issuer of Visa-branded credit cards, said its charge-off rate declined to 8.02 percent from 8.12 percent, while Capital One's fell to 9.04 percent from 9.77 percent.

Discover Financial Services said its charge-off rate declined to 8.54 percent from 8.69 percent.

We believe that credit losses will rise in the coming months and should remain elevated in 2010, thereby pressuring earnings, Credit Suisse analyst Moshe Orenbuch wrote in a note to clients.


Capital One said delinquencies rose to 5.72 percent in October from 5.38 percent in September, while JPMorgan's late payments rose to 4.95 percent from 4.69 percent.

Last week, Capital One Chief Executive Richard Fairbank forecast that charge-offs will keep rising and remain elevated throughout 2010, hurt by weakness in the housing market and job losses.

Bank of America's delinquency rate inched up to 7.59 percent from 7.53 percent, and Discover's rose to 5.72 percent from 5.57 percent.

American Express was the exception, as delinquencies remained unchanged at 4.1 percent.

As card losses rose to record highs in recent months, lenders closed millions of accounts, trimmed credit limits and slashed rewards. The companies are also raising fees and interest rates ahead of a new consumer-protection law.

Citigroup Inc , the largest issuer of MasterCard-branded credit cards, is also due to report the monthly performance of its credit card portfolio on Monday.

American Express shares rose 3.8 percent to $41.89 in Monday afternoon trading.

Discover shares were up 4.8 percent to $16.14, Capital One gained 2.9 percent to $39.91, Bank of America was up 0.6 percent at $16.08, and JPMorgan gained 0.9 percent to $43.29.

(Reporting by Juan Lagorio; editing by John Wallace and Tim Dobbyn)