Fitch: U.S. Credit Card ABS Closes Stellar 1H'13 as Economy Gains Momentum
NEW YORK -- July 9, 2013
Recent increases in consumer spending and other positive macro data are clear
signs that the broader U.S. economy is gaining momentum, which should bode
well for U.S. credit card ABS, according to Fitch Ratings.
Credit card ABS performance closed out first half-2013 (1H'13) in much the
same way it began, with chargeoffs and delinquencies again finishing at new
Credit card usage is rising so consumers are clearly willing to spend and
charge more, though not enough to affect their willingness to pay down their
balance on time.
Fitch's Prime Monthly Payment Rate (MPR) Index hit another all-time high for
the May 2013 reporting period. Along with a record high MPR, chargeoffs fell a
seven-year low this month while 60+ day delinquencies plunged to an all-time
low for the third consecutive month. Three-month average excess spread also
climbed to an all-time high. All of these positive trends for the index are
consistent with Fitch's preliminary results released in mid-June.
Fitch's MPR index increased by 178 basis points (bps) month-over-month
reaching 25.30%. This represents the highest number recorded since Fitch's
Prime Credit Card Index was launched in 1991. MPR has increased 13.50% from
the same period a year ago.
Fitch's Prime Credit Card Chargeoff Index decreased to the lowest levels seen
since July 2006, falling to 3.71% from 3.92%. Chargeoffs have declined 27.11%
year-over-year and have decreased 68% since the peak in 2009. Fitch continues
to expect credit card losses to plateau in the near term before trending
slightly higher later this year.
Fitch's Prime 60+ Day Delinquency Index fell to an all-time low for the third
consecutive month, explaining the continuous decrease in chargeoff levels
experienced in the 2Q'13. Delinquencies dropped eight bps to 1.40% from 1.48%
in May 2013. Delinquent payments have now declined 26.32% since the same
period in 2012.
Gross yield increased this month, reverting back to normal following a
seasonal decline in May. Gross yield for the May 2013 reporting period was
18.41% compared to 17.98% seen last month. As a result of the increase in
gross yield, one-month excess spread increased by 69 bps to 12.17%.
Three-month average excess spread experienced a new record high, increasing 31
bps to 12.04%. Three-month average excess spread has increased 13.69%
Fitch's Prime Credit Card Index was established in 1991 and tracks over $111
billion of prime credit card ABS backed by approximately $241 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.
After experiencing some weakening last month, Fitch's Retail Credit Card Index
improved and continues to remain positive. 60+ day delinquencies were down to
2.29%, the lowest level observed since Fitch launched its Retail Credit Card
Index in 2004. Delinquencies are now down 14.87% since the same period last
year. The decline in delinquencies drove a 25bps decline in chargeoffs,
falling to 6.66% from 6.91%.
Fitch's Retail Gross Yield Index declined for the third consecutive month to
26.83%, though it remains higher than the long-term average of 25.14%. Gross
yield has increased 3.19% since the same period in 2012. The decline in gross
yield caused a decline in excess spread for the month of May, falling 130 bps
to 15.15% from 16.45%. Three-month excess spread still remains positive,
increasing four bps month over month to 17.12% and is up 21.68%
Fitch's Retail Credit Card Index tracks more than $20 billion of retail or
private label credit card ABS backed by over $33 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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