Fitch: U.S. Credit Card Chargeoffs Close 2012 22% Lower than Last Year
After dropping below record lows not seen in over six years, U.S. credit card ABS chargeoffs rose back to normalized levels last month while delinquencies fell further to end 2012, according to the latest index results from Fitch Ratings.
All other major collateral metrics, including yield and payment rates, improved during the December collection period.
According to Fitch's 60+ Day Delinquency Index, late payments dropped 10 basis points (bps) after coming to a halt for the last three months. Delinquencies declined to a level of 1.63%, a new historical low to close out the year and the lowest level since Fitch launched its prime index in 1991. This improvement has pushed late stage delinquencies a staggering 64% below peak levels reached at the end of 2009.
Fitch's Prime Credit Card Chargeoff Index rose 20 bps during the same period following a temporary decline in the prior month. Losses normalized to 4.18% from 3.98% after breaking below levels not observed since 2006. Chargeoff rates, following a year-long trend of declining delinquencies, ended 2012 22% lower from the same period last year.
Three-month average excess spread measures also reached new heights to round out the year by increasing its ninth consecutive month. Excess spread is now at an all-time high of 11.64%. The recent improvement in excess spread levels are almost doubled when compared to its long term index average of roughly 6%.
Performance of both gross yield and monthly payment rate (MPR) were favorable as well during the December collection period. Yield increased 43 bps to 18.61% while MPR jumped 66 bps to 22.93% and recorded the second highest level historically.
Fitch's Prime Credit Card index was established in 1991 and tracks more than $96 billion of prime credit card ABS backed by approximately $269 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 performance of Fitch's Retail Credit Card Index for the end of 2012 was mixed, both chargeoffs and delinquencies fell. Gross retail chargeoffs dropped 27 bps to 6.42% and are approximately 24% lower than the previous year's results. Late stage retail delinquencies also declined eight bps, a 20% improvement compared to levels during the same period last year.
Similar to the prime index, retail three-month average excess spread broke a new record and extended an improving trend for the 11th straight month. It increased six bps to finish the year at 15.66% compared to its long term average of roughly 8.5%.
Fitch's Retail Credit Card index tracks more than $27 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.
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.
Additional information is available at www.fitchratings.com.
Herman Poon, +1-212-908-0847
Fitch Ratings, Inc., One State Street Plaza, New York, NY 10004
Michael Dean, +1-212-908-0556
Steven Stubbs, +1-212-908-0676
Sandro Scenga, +1-212-908-0278