Fitch: New Record Low for U.S. Credit Card Chargeoffs
The strengthening job market continues to bode well for U.S. credit card ABS as prime credit card chargeoffs reached a new record low, according to the latest monthly index results from Fitch Ratings.
The Bureau of Labor Statistics reported that four-week average jobless claims fell for the fourth consecutive week. Closing at 263,250 for the week of Oct. 17, four-week average jobless claims reached its lowest level since December 1973. Unemployment continues to remain steady at 5.1%.
Prime credit card metrics improved this month after retreating slightly in September. Fitch's Prime Credit Card Chargeoff Index declined to a new historic low of 2.47%. This represents the lowest rate for prime chargeoffs since November of last year, when the previous record was 2.53%. Prime chargeoffs are also 6.44% lower month-over-month (MOM). Current performance remains approximately 79% lower than its peak in December 2009.
Fitch's Prime Credit Card 60+ Day Delinquency Index ticked up to 0.99% but remained below 1% for the fifth consecutive month. Current performance is 79% lower than its peak level from December 2009.
Fitch's Prime Credit Card Monthly Payment Rate (MPR) Index improved to 27.70% this month remaining 3.32% higher year-over-year (YOY). Fitch's Prime Credit Card Gross Yield Index also improved slightly this month at 18.93%. Fitch's Prime Credit Card Three-Month Excess Spread Index remained steady, declining four basis-points to 13.93%.
Fitch's Prime Credit Card Index was established in 1991 and tracks approximately $142.9 billion of prime credit card ABS backed by approximately $241.5 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.
Retail credit card metrics retreated for the most part, with chargeoffs and three-month excess spread improving. Fitch's Retail Credit Card Chargeoff Index declined to 5.94% for a fifth straight monthly decline, reaching its lowest value since October 2013. Current performance is roughly 55.7% lower than its all-time high of 13.41% from March 2010.
Fitch's Retail Credit Card Three-Month Excess Spread Index improved 1.89% MOM to 19.41%. The Three-Month Excess Spread index has now reached a historical high for the second straight consesutive month.
Fitch's Retail Credit Card 60+ Day Delinquency Index ticked up to 2.39% for the month of October but remains 5.29% lower YOY. Fitch's Retail Credit Card Gross Yield and MPR Indices fell for the month of October, clocking in at 28.77% and 15.49% respectively. Fitch's Retail Gross Yield Index is 3.71% higher YOY, while Fitch's Retail MPR Index is 2.76% lower than the same period last year.
Fitch's Retail Credit Card Index was established in 2004 and tracks approximately $20.7 billion of retail or private label credit card ABS backed by over $29.4 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'.
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