As positive U.S. macro and employment data fuels speculation that Fed
tapering is on the horizon, credit card ABS performance continues to
post record gains according to the latest Fitch Ratings' monthly index
Credit card ABS collateral again outperformed market expectations during
the October collection period. Most prime collateral metrics have now
surpassed levels never seen during the nearly 24-year history of Fitch's
credit card indices. The Fitch Prime 60+ Day Delinquency and Chargeoff
indices now stand at a record 1.25% and 2.98%, respectively.
Fostering Fed tapering speculation, GDP grew 3.6% on an annualized rate
as of 3Q'13. Better-than expected GDP growth coupled with positive
trends in labor market are ultimately positive for the U.S. Consumer
and, by extension, the performance of securitized credit card
Several encouraging unemployment data emerged this week, including
today's announced decrease in the national unemployment rate, now 7%.
Additionally, seasonally adjusted initial jobless claims fell to 298,000
for the week-ended Nov. 30, a drop of 23,000 from the previous week's
revised figure. The four-week moving average of initial claims (322,250)
has now been below the 350,000 psychological hurdle for the last several
weeks. Initial jobless claims and the unemployment rate are highly
correlated to the credit performance of unsecured debt.
The Fitch Prime 60+ Day Delinquency Index declined to 1.25% during the
October collection period. While only a three basis point (bp) decline
month-over month (MOM), the index remains nearly 26.5% below November
2013 levels. In addition, the Fitch Prime Chargeoff Index fell to a new
low of 2.98% representing a MOM decline of 5% and an impressive 28.4%
decline year-over-year (YOY). Prime chargeoffs now stand 74% below its
historical high of 11.52%, which was reached in September 2009.
Fitch's Prime Monthly Payment Rate (MPR) Index ascended to a record high
of 26.55% for October and remains up 18% YOY. Fitch's Three-Month
Average Excess Spread Index remained nearly flat MOM declining a mere 23
bps to 12.75%., yet still 17% above YOY levels.
Fitch's Prime Credit Card Index was established in 1991 and tracks over
$115 billion of prime credit card ABS backed by approximately $237
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 retail credit card indices faired less favorably in October. The
Fitch Retail 60+ Day Delinquency Index increased for the fifth straight
month 2.67%, a 3% MOM gain. A steady increased in late stage
delinquencies have translated into losses as the Fitch Retail Chargeoff
Index increased 9% in October to reach 6.24%; however, it should be
noted that this index remains nearly 2.5% lower than one year ago and
53.5% lower than its peak of 13.41% reached in March 2010.
The Fitch Retail MPR Index increased by 3.4% to 15.61% with this gain,
similarly to that in the prime space, likely being driven by day count.
The Fitch Retail 3-month Average Excess Spread Index declined slightly
to 17.81%. One should note, however, that this metric remains 17% higher
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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