Fitch: Uptick in Delinquencies Short-Lived for U.S. Credit Card ABS
NEW YORK -- December 10, 2012
Last month's minor uptick in delinquencies appears to be little more than a
minor blip for U.S. credit card ABS performance as the end of 2012 approaches,
according to the latest index results from Fitch Ratings.
Overall performance in U.S. collateral credit quality continues to trend
positively as credit card ABS performance registered positive gains across the
board. All variables, which include delinquencies, yield, monthly payment rate
(MPR) and excess spread improved during the November distribution period while
chargeoffs held steady. A possible test awaiting the sector, however, is the
aftershock following Hurricane Sandy. Credit card performance may be mildly
impacted, though how much so remains to be seen.
After snapping a 12-month streak last month, Fitch's 60+ Day Delinquency Index
made up ground and improved one basis point (bp) to 1.70% in November.
Although the month-over-month improvement is small, late payments are still
down more than 26% year-over-year. In fact, late payments registered the
second lowest rate in any given month since the inception of Fitch's index in
1991. Fitch's Prime Credit Card Chargeoff Index for November showed little
movement as well with performance holding still at 4.16%.
Gross yield improved in November after a momentary slip last month and
increased 38 bps to 18.37%. Accordingly, excess spread results followed suit
as the gains in yield and chargeoffs continue. Monthly excess spread increased
42 bps to 11.61%, while the three-month average improved another 18 bps to
11.38%. This average again equaled the record high observed in September 2011
and improved for a seventh straight month. Monthly payment rate rebounded as
well in November, surging 89 bps to 22.43% and setting the second highest
level since inception.
Fitch's Prime Credit Card index was established in 1991 and tracks more than
$103 billion of prime credit card ABS backed by approximately $262 billion of
principal receivables. The index is primarily comprised of general purpose
portfolios originated by institutions such as Bank of America, Citibank,
Chase, Capital One, Discover, etc.
Retail card loss performance trends also improved, but yield and MPR dipped.
Early and late stage delinquencies, along with chargeoffs, all improved in
November. Receivables associated with accounts 30 days and 60 days past due
registered a slight improvement of two bps lower to 4% and flat at 2.71%,
Fitch's Retail Credit Card Chargeoff Index also dropped in November and
decreased 18 bps to 6.39%, marking the fourth straight month of improvement.
Three-month moving average excess spread metrics, as a result, improved for a
ninth consecutive month, jumping to a historic high of 15.25%.
Gross yield for the month dropped 1.37% to 25.89% after a one-month surge in
October while MPR remained relatively stable at just under 15%.
Fitch's Retail Credit Card index tracks more than $26 billion of retail or
private label credit card ABS backed by approximately $50 billion of principal
receivables. The index is primarily comprised of private label portfolios
originated and serviced by Citibank (South Dakota) N.A., GE Money Bank and
World Financial Network National Bank. More than 165 retailers are
incorporated including Wal-Mart, Sears, Home Depot, Federated, Loews, J.C.
Penney, Limited Brands, Best Buy, Lane Bryant and Dillard's, among others.
ABS ratings on both prime and retail credit card trusts are expected to remain
stable given available credit enhancement, loss coverage multiples, and
structural protections afforded investors.
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