News Column

Fitch: Four Year-Low for Unemployment a Plus for U.S Credit Card ABS

May 2, 2014

NEW YORK--(BUSINESS WIRE)-- U.S. credit card ABS continues to chug along strongly and today's encouraging unemployment numbers may help extend the sector's historic streak, according to the latest monthly index results from Fitch Ratings.

The Labor Department today reported that total nonfarm payroll employment grew by 288,000 and that the unemployment rate has dropped to 6.3% from 6.7%. This represents the largest drop in unemployment since September of 2008.

The encouraging employment numbers along with increased retail sales and consumer spending have helped to offset lackluster GDP results for last quarter and contribute to solid credit card ABS performance. Retail sales rose 1.1% in March while consumer spending increased 0.9% . All indications still point to U.S. credit card ABS performance staying in record territory for the near term.

Fitch's Prime Credit Card Chargeoff Index increased slightly for the March collection period after declining for the past two months, now at 3.04%. The index has declined 24% year-over-year (YOY) and is now 74% below its historic high of 11.52% reached in September 2009.

Fitch's Prime Credit Card 60+ Day Delinquency Index fell six basis points (bps) to 1.17% in March after increasing for two straight months. The decline marks a milestone for the index, now at its lowest level since its launch in 1991. The index has declined 24.5% YOY and stands 74% below its peak level reached at the end of 2009. This metric indicates the percentage of balances with borrowers who have missed two or more payments.

After a seasonal decline last month, Fitch's Monthly Payment Rate Index bounced back up to 26.71% in March. This index is now 9% higher YOY though well above its historical average of 17.15%. Similarly, Fitch's Prime Gross Yield Index increased 74 bps MOM to 19.04% and is also above its historical average of 18.68%.

The health of prime credit card trusts is further evident in Fitch's Prime Three-Month Average Excess Spread Index, which advanced 14 bps MOM to 13.03% (16 bps off the index's all-time high). This index has now increased 13% YOY and now stands at over twice its lifetime average of 6.46%.

Fitch's Prime Credit Card Index was established in 1991 and tracks over $124.9 billion of prime credit card ABS backed by approximately $255.3 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.

While Fitch's prime credit card indices continued positive trends on average, retail performance was mixed. Fitch's retail credit card indices registered positive momentum in excess spread and delinquencies, while gross yield and MPR were lower. Retails charge-offs remained flat MOM.

Fitch's Retail Credit Card 60+ Day Delinquency Index decreased by 29 bps MOM to 2.46%, a 10.5% increase, while Fitch's Retail Credit Card Chargeoff Index remained flat at 6.65%. The charge-off index remains 50% lower than its peak of 13.41% reached in March 2010.

After hitting a record high the previous month, Fitch's Retail Credit Card Gross Yield Index decreased by 174 bps MOM to 28.39%. Results were comparable for Fitch's Retail Credit Card Monthly Payment Rate Index which also declined by 57 bps MOM to 15.34%. Fitch's Retail Three-Month Average Excess Spread Index increased 99 bps MOM to 18.48%, marking an all-time high for this index since its inception in 2004.

Fitch's Retail Credit Card Indices track more than $19.9 billion of retail or private label credit card ABS backed by over $48.9 billion of principal receivables. The index is primarily comprised of private label portfolios originated and serviced by Citibank (South Dakota) N.A., GE Capital Retail Bank and Comenity Bank (Formerly 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.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings, Inc.

Jenny Ovalle, +1-212-908-0849

Associate Director

Fitch Ratings, Inc., One State Street Plaza, New York, NY 10004

or

Michael Dean, +1-212-908-0556

Managing Director

or

Media Relations

Sandro Scenga, +1-212-908-0278

sandro.scenga@fitchratings.com

Source: Fitch Ratings


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Business Wire


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters