Fitch: Chargeoffs Hit Four-Year Low for U.S. Credit Card ABS

Fitch: Chargeoffs Hit Four-Year Low for U.S. Credit Card ABS | Bild: © ad-hoc-news

Fitch's Prime Credit Card Chargeoff Index for January dropped 31 basis points (bps) to 5.33%, a level not seen since the end of 2007. Chargeoff performance remained approximately 36% lower compared to January 2010. Prime chargeoffs have diminished by more than half from an all-time high of 11.37% set in February 2010. Along with chargeoffs, delinquencies and excess spread also improved.

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.

Registering its 23rd straight month of decline, Fitch's late stage delinquency index shed another four basis points (bps) to settle at 2.26%. This metric represents the receivables associated with accounts more than 60 days delinquent expressed as a percentage of total receivables. The ongoing rapid improvement in performance has pushed the delinquency index by 50% below peak levels of 4.54% that was experienced just two years ago. Early stage delinquent balances, associated with borrowers who have missed at least one payment, also declined another 10 bps to 3.10%.

After a decline last month, yield picked back up and gained nine bps to 18.94%. With strong yield performance and continued improving loss metrics, excess spread generation has remained robust. One-month excess spread increased 37 bps to 10.90%. Three-month average excess spread also improved, albeit marginally, by eight bps to 10.84%. Performance of monthly payment rate also continues its trend above the 20% mark. In January, MPR fared better by more than 1% to 21.52%.

Fitch's Prime Credit Card index was established in 1991 and tracks more than $131 billion of prime credit card ABS backed by approximately $255 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 performance was somewhat mixed in January. Chargeoffs edged up slightly by six bps to 8.42% while early and late stage delinquencies both improved roughly 30 bps each to 4.82% and 3.28%, respectively.

Retail yield and excess spread levels dipped from the previous month while monthly payment improved for the second straight month to 15.0%.

Fitch's Retail Credit Card index tracks more than $34 billion of retail or private label credit card ABS backed by approximately $53 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.

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