Fitch: U.S. Credit Card ABS Holds Steady
Performance of U.S. credit card ABS eased off of record levels touched last month, according to the latest monthly index results from Fitch Ratings.
Prime credit card metrics retreated slightly from record marks. Fitch's Prime Credit Card 60+ Delinquency Index increased one basis point (bp) to 0.93% following four straight months of declines. The index remains at its second lowest value historically and has been below 1% since May 2016. The delinquency index is 2.34% lower than prior year levels and is well below the historical high of 4.54% from December 2009. Fitch's Prime Credit Card Chargeoff Index ticked up three bps this month to 2.55%. The index is stable year-over-year, and current levels remain well below the 2009 peak of 11.52%.
Consumer Credit increased at an annual rate of 4.1% for the month of June, according to the Federal Reserve release on Aug. 5. Growth in revolving credit had been weak the past two months, increasing just 1.3% and 2.2% in April and May, respectively. This comes after growing at an annual rate of 5.3% for first quarter-2016. Consumer credit is made up of revolving credit, where credit card debt is tracked, and non-revolving credit. While non-revolving credit has been fueling growth in consumer credit lately, revolving credit bounced back for the month June, increasing at an annual rate of 9.7%. In addition, the Bureau of Economic Analysis reported that consumer spending rose for the fourth straight month in July.
Consumer spending rose 1.1% in April, 0.3% in May, 0.5% in June and 0.3% for the month of July. The labor market remains healthy as the Bureau of Labor Statistics reported four-week average jobless claims of 264,000 as of Aug. 25, about 4,000 higher than for the month of July. Despite the minor increase month-over-month, four-week average jobless claims have remained at a level below 300,000 indicating a strong labor market. Jobless claims and consumer credit will continue to bode well for U.S. credit card ABS metrics.
Fitch's Prime Credit Card Gross Yield and Monthly Payment Rate (MPR) Indices retreated this month, after MPR registered a record high for the month of July. Performance for the MPR and Gross Yield indices are in line with prior year levels. Fitch's Prime Three-Month Excess Spread Index improved to 14.19%, just one bp shy of its historical high. The index has registered above 14% for the past three months.
Fitch's Prime Credit Card Index was established in 1991 and tracks approximately $142.5 billion of prime credit card ABS backed by over $219.2 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.
Retail credit card metrics showed positive movement for both chargeoffs and 60+ delinquencies. Fitch's Retail Credit Card Chargeoff Index decreased to 6.31% for the month of August. Fitch's Retail 60+ Day Delinquency Index also decreased this month, falling to 2.27% Fitch's Retail Credit Card Gross Yield fell to 27.95% for the month of August. The index is approximately 2% lower than prior year levels. Fitch's Retail Credit Card MPR Index fell to 15.55% and is 3.18% lower YOY.
Fitch's Retail Credit Card Index was established in 2004 and tracks approximately $19.3 billion of retail or private label credit card ABS backed by over $27.5 billion of principal receivables. The index is primarily composed of private label portfolios originated and serviced by Citibank 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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