Fitch: U.S. Credit Card Chargeoffs Close Out 2012 at Six-Year Low
NEW YORK -- January 10, 2013
U.S. credit card ABS finished 2012 on a strong note with chargeoffs shattering
another record low, according to the latest index results from Fitch Ratings.
Prime credit card chargeoffs dipped below 4% for the first time since 2006,
falling to 3.98% in December. The 18 basis point (bp) decline in chargeoffs is
a continued result of declining bankruptcy filings delinquencies throughout
2012 which have stabilized somewhat in the past few months. Chargeoffs have
declined 29.43% since the end of 2011.
Late stage delinquencies increased three basis points (bps) in December to
1.73%. Despite the small increase, late payments remained relatively steady
around the 1.70% mark for the past four months. This is a sign that
delinquencies are stabilizing and could be a harbinger of chargeoffs
plateauing in the coming months. In 2012, Fitch's 60+ Day Delinquency Index
declined by almost 25% year-over-year.
Gross yield slipped slightly this month by 19 bps to 18.18%. This is in line
with the average for 2012 of 18.19% and not far off the historical average of
18.56%. On the whole, gross yield has remained fairly stable this year, only
decreasing 3.45% since the end of 2011. Despite a decline in gross yield,
three-month average excess spread has reached an all-time high of 11.51%,
surpassing the previous high of 11.38% last month. The increase in excess
spread is being driven by the decline in chargeoffs.
Monthly payment rate (MPR) is down slightly to 22.27% from 22.43% last month
and the historic high of 22.99% in September 2012. This is above the
historical average of 19.30%.
September 2012 marked the first time total ABS outstandings had increased
since December 2011. However since that point the balance has declined each
month and is now under the $100 billion mark for the first time since December
1995. Outstandings have declined by 25.85% over the past year as ABS notes
continue to mature and are not replaced by new issuance.
Fitch's Prime Credit Card index was established in 1991 and tracks more than
$99 billion of prime credit card ABS backed by approximately $263 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.
With the exception of chargeoffs, performance of Fitch's Retail Credit Card
Index improved. Gross yield rose by 2.36% to 26.50% this month after a dip to
25.89% last month. Overall, gross yield has increased 3.23% in the past year.
MPR also rebounded this month after a temporary two month slip, improving 72
bps to 15.81%.
Chargeoffs increased 4.69% to 6.69% after dropping almost 20% over the course
of 2012. Chargeoffs are still well below the historical average of 9.09%. 60+
day delinquencies have been stabilizing around 2.70% for the past seven months
after peaking in early 2009.
Fitch's Retail Credit Card index tracks more than $27 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.
Additional information is available at 'www.fitchratings.com'.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
Lauren Tierney, +1-212-908-9168
Michael Dean, +1-212-908-0556
One State Street Plaza
New York, NY 10004
Sandro Scenga, New York, +1-212-908-0278
Press spacebar to pause and continue. Press esc to stop.