RPT-Fitch: U.S. Prime Credit Card ABS Poised to End 2013 on Upbeat Note

Wed Jan 8, 2014 9:15am EST

Jan 8 (Reuters) - (The following statement was released by the rating agency)

2013 is likely to go down as a personal best of prime collateral performance ever experienced for U.S. prime credit card ABS, according to the latest index results from Fitch Ratings.

While robust collateral performance and rating stability have been what investors have come to expect, the performance for 2013 will stand out, with nearly all of Fitch's prime credit card indices touching historic levels. That said, the Fitch Prime 60+ Day Delinquency and Chargeoff Indices may be approaching their troughs.

Fitch's Prime 60+ Day Delinquency Index increased two basis points (bps) in December to 1.27% from 1.25%. Despite the small month-over month (MOM) increase, 60+ day delinquencies remain relatively low compared to one year ago when they were 1.73%, a decline of nearly 27% year-over year (YOY). Fitch's Prime Credit Card Chargeoff Index also increased slightly, adding three bps to reach 3.01%. Chargeoffs have declined 24.37% YOY and now stand 74% below their historical high of 11.52%, reached in September 2009.

Fitch's Prime Credit Card Gross Yield Index declined by four bps to 18.17% for the November collection period. However, the number is in-line with its 2013 average of 18.23% and not far off the historical average of 18.52%. Despite a decline in gross yield, three-month average excess spread has reached an all-time high of 12.97%. The increase was likely being driven by the decline in chargeoffs as well as reduced interest expense. Fitch's Prime Credit Card Monthly Payment Rate Index also declined MOM, falling to 24.49% from last month's historic high of 26.55%. However, MPR has remained up 9.97% YOY and is over 35% higher than levels reached during the recent financial crisis.

Fitch's Prime Credit Card Index was established in 1991 and tracks over $119 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.

Fitch's Retail Credit Card Indices fared somewhat less favorably than the Prime Index for the November collection period. Fitch's Retail Credit Card 60+ Day Delinquency Index increased for the sixth straight month to 2.73%, a 2.25% increase MOM. A steady increase in late stage delinquencies has caused a rise in losses, thus having an impact on Fitch's retail chargeoff index. Fitch's Retail Credit Card Charge-off Index increased to 6.65% compared to 6.24% last month. Despite the increase, it is important to note that the index remains nearly 1% lower YOY and is 50% lower than its peak reached in March 2010.

After a decline in the previous month, Fitch's Retail Credit Card Gross Yield Index increased 72 bps to 27.86%, which represents a 5% increase YOY. On the other hand, Fitch's Retail MPR Index decreased by almost 1% to 15.46%, a decline of 1.5% YOY.

Fitch's Retail Credit Card Index tracks more than $20 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.

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