Jan 10 - U.S. credit card ABS finished 2012 on a strong note
with chargeoffs shattering another record low, according to the latest index
results from Fitch Ratings.
Prime credit card chargeoffs dipped below 4% for the first time since 2006,
falling to 3.98% in December. The 18 basis point (bp) decline in chargeoffs is a
continued result of declining bankruptcy filings delinquencies throughout 2012
which have stabilized somewhat in the past few months. Chargeoffs have declined
29.43% since the end of 2011.
Late stage delinquencies increased three basis points (bps) in December to
1.73%. Despite the small increase, late payments remained relatively steady
around the 1.70% mark for the past four months. This is a sign that
delinquencies are stabilizing and could be a harbinger of chargeoffs plateauing
in the coming months. In 2012, Fitch's 60+ Day Delinquency Index declined by
almost 25% year-over-year.
Gross yield slipped slightly this month by 19 bps to 18.18%. This is in line
with the average for 2012 of 18.19% and not far off the historical average of
18.56%. On the whole, gross yield has remained fairly stable this year, only
decreasing 3.45% since the end of 2011. Despite a decline in gross yield,
three-month average excess spread has reached an all-time high of 11.51%,
surpassing the previous high of 11.38% last month. The increase in excess spread
is being driven by the decline in chargeoffs.
Monthly payment rate (MPR) is down slightly to 22.27% from 22.43% last month and
the historic high of 22.99% in September 2012. This is above the historical
average of 19.30%.
September 2012 marked the first time total ABS outstandings had increased since
December 2011. However since that point the balance has declined each month and
is now under the $100 billion mark for the first time since December 1995.
Outstandings have declined by 25.85% over the past year as ABS notes continue to
mature and are not replaced by new issuance.
Fitch's Prime Credit Card index was established in 1991 and tracks more than $99
billion of prime credit card ABS backed by approximately $263 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.
With the exception of chargeoffs, performance of Fitch's Retail Credit Card
Index improved. Gross yield rose by 2.36% to 26.50% this month after a dip to
25.89% last month. Overall, gross yield has increased 3.23% in the past year.
MPR also rebounded this month after a temporary two month slip, improving 72 bps
Chargeoffs increased 4.69% to 6.69% after dropping almost 20% over the course of
2012. Chargeoffs are still well below the historical average of 9.09%. 60+ day
delinquencies have been stabilizing around 2.70% for the past seven months after
peaking in early 2009.
Fitch's Retail Credit Card index tracks more than $27 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
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.