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Fitch: U.S. Prime Credit Card ABS Undaunted Amid Fed Taper Talk; Retail Stumbles

12/06/2013 | 10:18am EDT

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 results.

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 receivables.

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 YOY.

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.

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
Steven Stubbs
Senior Director
+1-212-908-0676
Fitch Ratings, Inc., One State Street Plaza, New York, NY 10004
or
Michael Dean
Managing Director
+1-212-908-0556
or
Media Relations:
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com


© Business Wire 2013
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