Two of the biggest U.S. credit card companies, Capital One Financial Corp and Discover Financial Services , reported lower-than-expected defaults and delinquencies in June, sending their shares sharply higher.

The reports may signal that American consumers' credit positions are not deteriorating as rapidly as feared, despite rising unemployment and the continuing housing slump. The U.S. savings rate has been increasing, which may help.

A lot of the weaker customer base has already charged off, said Sanjay Sakhrani, an analyst at KBW. You have a better core portfolio. But that is not to say that portfolio is not immune from what is going to be a weaker macro economic backdrop.

Credit card chargeoffs -- loans the companies do not expect to be repaid -- remain on track to reach record highs before peaking around the end of 2009 or in early 2010.

Accounts at least 30 days delinquent -- often an indicator of future defaults -- fell in June. But analysts said the drop was largely a seasonal trend as consumers used tax refunds to pay off debts; they expect delinquencies to rise in coming months.

Capital One's charge-off rate rose less than expected, to 9.73 percent in June from 9.41 percent May. Discover's defaults fell for the first time since October 2008, to 8.75 percent from 8.91 percent.

Both companies, which had conservative lending policies during the credit boom of 2003-2007, have consistently outperformed bigger rivals such as American Express Co and Citigroup Inc .

Given the continued weak employment data -- increasing unemployment rate, fewer hours worked, stagnant wages -- we view the recent strength as seasonal, FBR analysts said in a research note.

Other data showed consumers remain under stress. Bank of America Corp , the largest U.S. bank, said on Wednesday its default rate rose to 13.81 percent in June from 12.50 percent in May.

The bank is paying the price of expanding rapidly in recent years and having one of the highest concentrations of subprime borrowers among the top card issuers, analysts said.

Bank of America also has a large exposure in California and Florida, two of the states hit hardest by the housing crisis and high unemployment.

DELINQUENCIES KEEP FALLING

Delinquencies fell across the board: Capital One's delinquency rate fell to 4.77 percent in June from 4.90 percent in May, Discover's declined to 5.25 percent to 5.38 percent, and Bank of America's was down to 7.73 percent from 7.95 percent.

It is hard to say this trend is going to be sustained when we get to a more difficult period after the summer months, but it is a positive note, Sakhrani said. We continue to believe chargeoffs are going to go up. We are at records right now, and we are probably going to keep going up from here.

Credit card defaults usually track unemployment, which rose in June to a 26-year high of 9.5 percent and is expected to peak at more than 10 percent by year-end.

Analysts expect credit card default rates to peak at between 12 and 14 percent between the end of 2009 and early 2010, with losses topping $100 billion. They do not expect the credit card industry to be profitable until 2011.

Credit card lenders are trying to protect themselves by tightening credit limits, raising standards and closing inactive accounts. They have also been slashing rewards, increasing interest rates and boosting fees to cushion against further losses.

Companies are accelerating interest rate and fee increases ahead of a law, due to take effect in February 2010, that will limit their ability to impose such increases.

Capital One shares were up nearly 10 percent at $25.40 at midday on the New York Stock Exchange. Discover was up 3.9 percent to $10.62, and American Express rose 6.1 percent to $25.95.

Shares of Bank of America rose 3.8 percent to $13.40.

American Express, the largest U.S. credit card company by sales; Citigroup, the biggest U.S. issuer of MasterCard credit cards; and JPMorgan Chase & Co were expected to release reports on the their credit card portfolios later Wednesday.

(Reporting by Juan Lagorio, editing by John Wallace)

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