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