Fitch: U.S. Credit Card ABS Closes 1H'15 on Strong Note
Strong consumer indicators bode well for U.S. credit card ABS as delinquencies continue to fall to unprecedented levels as first half-2015 draws to a close, according to the latest monthly index results from Fitch Ratings.
Consumer credit increased $20.5 billion in the month of April after a revised increase of $21.3 billion in March, as reported by the Federal Reserve on June 5th. Revolving credit, which predominantly reflects credit card usage, rose $8.6 billion (up from an increase of $4.9 billion in March). The recent expansion in consumer credit is a good indication of potential future spending levels and a positive for credit card ABS.
In addition, the U.S. Department of Commerce reported that retail sales increased 1.2% in May; a sign the economy continues to improve. March's revised growth of 1.5% marked the strongest monthly gain in five years.
Fitch's Prime Credit Card 60+ Delinquency Index decreased to 0.98% from 1.02% in June, dropping to its lowest level since the inception of the index in 1991. This marks only the second time delinquencies have fallen below 1% historically. Current performance is 3.92% lower month-over-month (MOM) and 11.02% lower year-over-year (YOY), and remains 78% below its peak level in December 2009. The index indicates the percentage of balances with borrowers who have missed two or more payments.
Fitch's Prime Credit Card Gross Yield increased for the month of June, in line with seasonal trends. The index now stands at 19.23%, and is 4.85% higher than the same period last year. Yield performance has increased every June since 1992. Fitch's Prime Three-Month Excess Spread Index also improved slightly, reaching 13.95% for the month of June and is 1.31% higher MOM and 5.12% higher YOY.
Fitch's Prime Monthly Payment Rate (MPR) Index improved to 27.50% for the month of June. The index is 1.84% higher than the same period last year and well above its historical average of 17.60%.
Prime Credit Card Chargeoff Index increased slightly to 2.84% for the June reporting period. The index is 7.49% lower compared to the same period last year and 75% lower than its all-time high of 11.52% reached in September 2009.
Fitch's Prime Credit Card Index was established in 1991 and tracks over $147.6 billion of prime credit card ABS backed by approximately $247.8 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's retail credit card indices registered positive momentum in delinquencies and chargeoffs for the month of June. Fitch Retail Credit Card 60+ Day Delinquency Index declined for the fifth consecutive month reaching an all-time low. The index fell 4.89% MOM to 2.14%, down eight basis points (bps) from its previous low of 2.22%. The index is now 7.38% lower than the same period last year. Fitch's Retail Credit Card Chargeoff Index also declined during this period, falling 6.25% MOM to 6.45% for the month of June. The index is slightly higher YOY, but is still 51.9% lower than its all-time high of 13.41% reached in March 2010.
On the other hand, Fitch's Retail Credit Card Gross Yield Index declined 4.39% in June to 26.59%. During the same period, Fitch's Retail Three-Month Excess Spread Index decreased 1.91% MOM to 17.91%. Fitch's Retail Credit Card MPR Index also declined 1.61% from the month of May to 15.86%.
Fitch's Retail Credit Card Index was established in 2004 and tracks more than $21.2 billion of retail or private label credit card ABS backed by over $29.6 billion of principal receivables. The index is primarily comprised of private label portfolios originated and serviced by Citibank (South Dakota) N.A, Synchrony Financial (Formerly GE Capital Retail Bank), and Comenity Bank (formerly World Financial Network National Bank). More than 165 retailers are incorporated including Walmart, Sears, Home Depot, Federated, Lowes, J.C. Penney, L Brands, Bon Ton, and Dillard's, among others.
Additional information is available at 'www.fitchratings.com'.
Stephanie Lobaccaro, +1-212-908-0769
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
Herman C. Poon, +1-212-908-0847
Sandro Scenga, New York, +1 212-908-0278