TEXT-Fitch: U.S credit card delinquencies rise for first time in a year

Wed Nov 14, 2012 1:44pm EST

Nov 14 - U.S. credit card delinquencies did something they have not done in
twelve months,...increase, according to the latest Credit Card Performance Index
results from Fitch Ratings.

This comes as credit card defaults fell to a new five-year low for October.

Late stage delinquencies snapped a 12-month streak by rising two basis points 
(bps) to 1.71% in October. Throughout 2012 thus far, however, late payments have
remained well below the 3% average of the prime index since inception. Early 
stage delinquencies, or receivables associated with accounts 30 days past due, 
remained relatively flat from the previous month at 2.21%. Fitch expects 
chargeoffs to remain relatively stable as delinquencies hover at these current 
levels.

Fitch's Prime Credit Card Chargeoff Index for October posted its second 
month-over-month improvement, decreasing another 13 bps to 4.16%. The decline 
this month in cardholder defaults represents the lowest level since early 2007 
and is down 25% year-over-year. From its peak in September 2009, this decrease 
also marks an astonishing 64% drop. Aside from a small blip for Citibank, the 
large trusts which make up the majority of the index including Bank of America, 
Capital One, Chase, and Discover; all reported monthly improvements in default 
rates.

Both gross yield and monthly payment rate (MPR) indexes slipped slightly, 
although MPR is still holding steady at historically strong levels. MPR 
registered at 21.54% in October, compared to the 12 month-average of 21.67%. 
Gross yield retracted minimally by 22 bps and remained at the 18% mark in 
October.

With a continued decline in chargeoffs and stable yield performance, three-month
excess spread measures managed to remain at near record highs while improving 
for the sixth consecutive month. It squeezed a gain of three bps during the 
September reporting period to 11.20%. Monthly excess spread decreased by 13 bps 
to 11.19%.

Fitch's Prime Credit Card index was established in 1991 and tracks more than 
$107 billion of prime credit card ABS backed by approximately $259 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 credit card ABS maintained strong momentum into the month of October, 
with improvements in most performance metrics from the previous month. Similar 
to the prime index, chargeoffs fell again and declined to levels not seen since 
the end of 2007, while delinquencies ticked upward for the second straight 
month.

Fitch's Retail Credit Card Chargeoff Index improved in October and decreased 26 
bps to 6.57% while registering a 60-month low. The decline marks the third 
straight month of improvement and is now roughly 50% lower than its peak 
exhibited in mid-2010. Late stage delinquency metrics, however, backed off 
recent lows yet remained relatively stable from the previous month, with an 
increase of only three bps to 2.71%. 

Meanwhile, three-month average excess spread on retail portfolios continues to 
make headlines as it improves yet again for the eighth straight month. Both 
monthly and three-month average excess spread measures posted record highs, with
the latter topping another 11 bps and settling in right under 15%. For the 
month, gross yield also improved to 27.26% while MPR slipped to 15.03%. 

Fitch's Retail Credit Card index tracks more than $28 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'
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