Fitch: U.S. Credit Card ABS Finishes 2015 Strong
Performance of U.S. credit card ABS finished 2015 in much the same way the last few years have trended, with most metrics posting month-over-month (MOM) improvements and some reaching new historical highs, according to the latest monthly index results from Fitch Ratings.
The labor market has remained robust and managed to uphold its strength throughout 2015, ending the year on a high. The Bureau of Labor Statistics (BLS) reported that employment rose by 2.9 million in 2015, higher than 2.6 million in 2014 and its best year since 1999. The unemployment rate has continued to show year-over-year improvement, holding steady at 5% for the month of December compared to 5.6% one year ago. The BLS also reported that initial jobless claims remain well below 300,000, clocking in at 278,000 for the week ended Jan. 23.
Revolving consumer credit, as reported by The Federal Reserve, increased $5.7 billion for the month of November after a modest $100 million gain in October. The annualized increase of 7.6% was higher than the average monthly gains for 2015.
Prime credit card metrics improved for the most part, ending 2015 on a strong note. Fitch's Prime Credit Card Monthly Payment Rate (MPR) Index reached a new historical high this month and increased to 29.8%. The index is 4.01% higher year-over-year (YOY). Fitch's Prime Credit Card Gross Yield Index improved 74 bps to 19.84% this month, its highest level in over four years and is 2.27% higher YOY. Fitch's Prime Credit Card Three-Month Excess Spread Index also increased this month, and reached a new historical high of 14.2%.
The measure of 60+ day delinquencies stayed relatively flat, decreasing two bps to 1.03% following three consecutive months of increases. The index is 4.63% lower than the prior year and well below the historical high of 4.54% reached in December 2009. Fitch's Prime Credit Card Chargeoff Index ticked up slightly to 2.64%, but remains 6.05% lower YOY. Current performance is approximately 77% lower than its peak of 11.52% reached in September 2009.
Fitch's Prime Credit Card Index was established in 1991 and tracks approximately $144.5 billion of prime credit card ABS backed by approximately $240.8 billion of principal receivables. The index is primarily composed of general purpose portfolios originated by institutions such as Bank of America, Citibank, Chase, Capital One, Discover, etc.
Fitch's Retail Credit Card MPR Index improved for the third straight month to 16.72%. The index is now 4.24% higher YOY and at its second highest value historically. Fitch's Retail Credit Card 60+ Day Delinquency Index decreased to 2.45% for the month of January, after increasing for the past five months.
Fitch's Retail Credit Card Gross Yield Index fell to 28.35% for the month of January. Fitch's Retail Credit Card Three-Month Excess Spread Index decreased to 18.48% but remains 4.05% higher YOY. Fitch's Retail Credit Card Chargeoff Index ticked up to 6.69% for the month of January. Performance is 50.11% lower than its all-time high of 13.41% from March 2010.
Fitch's Retail Credit Card Index was established in 2004 and tracks over $21.8 billion of retail or private label credit card ABS backed by over $30.8 billion of principal receivables. The index is primarily composed 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.
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