Fitch: U.S. Credit Card ABS Undeterred Amid Future Government Impasses
NEW YORK -- November 5, 2013
Performance for U.S. credit card ABS continues to cruise along, with the
impact of the most recent 16-day U.S. government shutdown and future potential
shutdowns likely to be muted, according to Fitch Ratings in its latest monthly
As per Fitch's latest monthly index, credit card ABS performance collateral
extended positive trends during the September collection period. 60+ day
delinquencies remained flat month-over-month and chargeoffs descending to
levels only observed once before in the 23-year history of the indices.
The potential effect of the most recent government shutdown will not be
evident until the middle of the month, though credit card ABS is not likely to
see any dramatic reversal in performance. The possibility of another
government impasse over the US debt ceiling doesn't figure to put a crimp in
credit card ABS performance either.
The Fitch Prime 60+ Day Delinquency Index increased one basis (bp) point
month-over-month (MOM) to 1.28% and remains 25% lower year-over-year (YOY).
The slight uptick in September is attributed to seasonality and is consistent
with historical patterns. At the same time, the Fitch Prime Credit Card
Chargeoff Index dropped to 3.12% for the September collection period. The
chargeoff rate now stands two bps above the all-time low for this index
(reached in March 2006). Chargeoffs fell 6.3% from the prior month and are
also down 25% YOY.
Perhaps most noteworthy is the fact that the Fitch Prime Chargeoff Index is
now 73% below its peak of 11.52% (reached in September 2009). Fitch believes a
material increase in chargeoffs is unlikely prior to year-end. In addition,
Fitch does not anticipate a near-term revision to mean delinquency or
chargeoff levels for securitized credit card receivables during 2015 (absent
any unforeseen macroeconomic deterioration).
The Fitch Prime Gross Yield Index was up 4.59% in September to 18.69% and
remains a healthy 3.89% above September 2012 levels. At the same time Fitch's
Three-Month Average Excess Spread Index registered 12.78%, a MOM increase of
3.31%. During the September 2013 collection period, the Fitch Prime Monthly
Payment Rate (MPR) Index declined to 25.29%, a 3.73% decline from the all-time
high seen this past August. However, MPR remains nearly 17.50% above the level
observed last September.
Fitch's Prime Credit Card Index was established in 1991 and tracks over $116
billion of prime credit card ABS backed by approximately $237 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.
Elsewhere, late stage retail credit card ABS delinquencies rose for the fourth
straight month. As per Fitch Retail 60+ Day Delinquency Index, delinquencies
reached 2.59%, a 7% jump from the previous month though still over 4% below
the levels from one year ago and significantly below its longer-run average of
3.89%. Additionally, the increased level of late stage delinquencies has not
yet translated to increased chargeoffs. In fact, the Fitch Retail Chargeoff
Index registered 5.74% for the September collection period, a six-year low for
this index. The Retail Chargeoff Index was down 5.59% from the previous month
and remains nearly 13% lower than one year ago.
The Fitch Retail Gross Yield Index increased by 26 bps in September to reach
27.37%, while Fitch Retail Three-Month Average Excess Spread Index increased
7.88% to 17.93%. This index remains strong and now stands at 20% above the
levels observed in 2012. During September Fitch's Retail MPR Index weakened
slightly, declining 3.14% from the previous month to end at 15.10%. However,
retail MPR remains above its long-term average of 13.97%.
Fitch's Retail Credit Card Index tracks more than $19 billion of retail or
private label credit card ABS backed by over $32 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 Wall-Mart, Sears, Home Depot, Federated, Lowes, J.C.
Penney, Limited Brands, Best Buy, Lane Bryant and Dillard's, among others.
Additional information is available at 'www.fitchratings.com'.
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