Positive macro news and the health of the U.S. consumer pushed credit card ABS
performance to levels not seen in more than two decades, according to the latest
monthly index results from Fitch Ratings.
The results come on the heels of this week's news of rising home prices and
stock market gains along with higher consumption rates for consumers.
Credit card ABS performance again hit or held near record levels on most fronts.
Prime 60+day delinquencies again touched record lows while retail late-pays
approached record lows. Excess spread has also reached new all-time highs for
both indices and monthly payment rates held near all-time highs.
Improved consumer confidence last month may be an early indicator that consumers
are beginning to feel a return of the 'wealth effect'. Evidence of this is the
surge in both equity and home prices, which expanded at the largest rate since
1996.
There is much to be said for the resiliency of credit card ABS, although credit
card delinquencies and losses will trend higher later this year, it could be a
while before we return to historical norms.
Despite that expectation, credit card ABS ratings are expected to remain stable
for the foreseeable future given the ample levels of protection and structural
features afforded investors.
Fitch's 60+ Day Delinquency Index reached an all-time low for the second time in
three months, declining to 1.55 percent from 1.65 percent. Late payments are now
down 27.57 percent since the same period in 2012. The record low for
delinquencies indicates that chargeoffs may decrease further before trending
slightly higher later in the year, as Fitch has long projected.
Fitch's Prime Credit Card Chargeoff Index increased by seven basis points (bps)
to 3.98 percent. Despite increasing slightly for two consecutive months,
chargeoffs remain 23.02 percent below the same period in 2012 and have decreased
65 percent since the peak in 2009.
Gross yield increased for the second straight month to 18.77 percent, its
highest level in 15 months. As a result of the increase in gross yield,
one-month excess spread increased by 6.28 percent to an all-time high of 12.18
percent. Three-month average excess spread increased to 11.52 percent from 11.37
percent and is up 12.72 percent since the same period in 2012.
Fitch's monthly payment rate (MPR) index climbed close to its historical high
reached in the February distribution period after a seasonal decline last month.
The normalization of MPR resulted in an increase of 197bps month-over-month and
is up 11.33 percent since the same period in 2012.
Fitch's Prime Credit Card Index was established in 1991 and tracks over $108
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.
Performance of Fitch's Retail Credit Card Index remained positive, with
delinquencies reaching their lowest level in over seven years. 60+ day
delinquencies came in at 2.56 percent, slightly higher than the level of 2.43
percent reached in the January 2006 reporting period. Delinquencies are now down
approximately 19 percent from the same period in 2012. Chargeoffs also declined
by 11.60 percent to 6.02 percent after increasing by 12.56 percent the month
before.
After an increase of over 300 bps in gross yield last month, retail gross yield
levels declined by 69 bps month-over-month to 27.90 percent from 28.59 percent.
This number is still up 6.49 percent year-over year. As a result of the high
level of gross yield, one-month excess spread and three-month average excess
spread increased from their all-time highs reached last month. One-month excess
spread and three-month average excess spread are now at levels of 18.33 percent
and 17.52 percent respectively.
Fitch's Retail Credit Card Index tracks more than $18 billion of retail or
private label credit card ABS backed by over $33 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.
