TD Cowen says card spending accelerated in first quarter

TD Cowen said credit card spending accelerated in Q1, with sequential trends slightly above expectations and balance growth showing modest acceleration. JPMorgan kept its 2026 loss guidance unchanged, while auto lending performance improved at both JPMorgan and Wells Fargo, including 24bps and 26bps quarterly declines in 30-plus day delinquencies, respectively. Used car values rose 4.7% sequentially, supporting the auto credit backdrop.

Analysis

The signal here is not just that consumer credit is holding up, but that underwriting discipline is still earning its keep. Better delinquency and charge-off trends, alongside steady reserve policy, suggest the credit cycle is still in a late-but-not-breaking phase; that typically supports bank multiples more than it moves near-term EPS. The second-order read is that the market may be underestimating how much of the “soft landing” narrative depends on the consumer staying employed rather than spending faster.

Within card and auto, the dispersion matters more than the headline. A faster pace of originations paired with improving delinquency metrics is usually supportive for lenders with scale, but it also implies easier year-over-year comparisons for revenue growth into the next few quarters. Used-vehicle firmness is the key latent tailwind: if values stay elevated, loss severity can remain contained even if payment stress rises, which delays any visible deterioration in net charge-offs by one to two quarters.

For JPM versus WFC, JPM looks like the cleaner quality trade, while WFC has more operating leverage if credit stays benign. The market may be too focused on loss rates and not enough on the fee/lease income support that can offset normalization in lending spreads. The risk is that a consumer slowdown shows up first in utilization and loan growth before it shows up in charge-offs; that creates a valuation trap where earnings estimates hold up until they suddenly do not.

The contrarian view is that improving asset quality is a lagging indicator in a period of still-elevated real borrowing costs. If rates stay restrictive into summer, the current resilience may simply be a payment holiday funded by balance transfers, tax refunds, and seasonal spending patterns. That argues for watching Q2 vintages closely rather than extrapolating Q1 trends into the second half.

Key Decisions for Investors

• Long JPM vs short KBE for 1-3 months: JPM has better credit quality and earnings durability, while regional bank beta is more exposed if consumer stress broadens; target 8-12% relative outperformance if the data stay constructive.
• Accumulate WFC on pullbacks for a 6-9 month horizon: the operating leverage to stable credit is higher than JPM, but size the position smaller because a modest deterioration in auto/consumer trends would hit sentiment faster; upside/downside skew is roughly 1.5:1.
• Sell downside protection on JPM via near-dated puts after any post-earnings volatility: the reserve posture and delinquency trends reduce crash risk over the next 30-60 days, making premium harvest attractive if implied vol remains elevated.
• Pair long JPM / short XLF-covered smaller lenders if credit stays stable for another quarter: this isolates quality dispersion and avoids taking broad market risk; if consumer data weaken, cover the short first because low-quality lenders will reprice fastest.
• Watch used-car pricing and auto vintage data as the catalyst trigger: if values roll over for two consecutive months, reduce exposure to auto-heavy lenders by 25-50% because loss severity will show up with a lag of roughly one quarter.