Fitch: U.S. Credit Card ABS Still in Healthy Range Amid Softening
U.S. credit card ABS performance for the most part continued to retreat for the month of August but continues to remain in a healthy range according to the latest monthly index results from Fitch Ratings.
After falling from a record high in July, Fitch's Prime Credit Card Monthly Payment Rate (MPR) Index bounced back for the month of August to 29.70%. The index is 6.94% higher year-over-year (YOY). Fitch's Prime Credit Card 60+ Delinquency Index increased for the second month in a row to 0.96%. The index has remained below 1% for an unprecedented five months. The delinquency index is steady YOY, and well below the historical high of 4.54% reached in December 2009. Fitch's Prime Credit Card Chargeoff Index increased for the second month in a row to 2.65%. The chargeoff index is just one basis point (bp) higher than September 2015.
The Conference Board Consumer Confidence Index rose to 104.1 for the month of September, up from 101.8 for the month of August. Consumer Confidence is now at its highest level since the recession, a clear sign that consumers feel optimistic about the labor market. Jobless claims have continued to trend near record lows, a positive for U.S. credit card ABS metrics. The Bureau of Labor Statistics reported that four-week average jobless claims fell to 256,000 for the week of Sept. 24. Four-week average jobless claims are about 9,000 lower than for the month of August, roughly 16,000 lower than the four-week average of 271,750 for September 2015.
Fitch's Prime Credit Card Gross Yield Index fell to 19% for the month of September. The index is 6.94% higher than the value from the previous year. Fitch's Prime Credit Card Three-Month Excess Spread Index decreased to 13.80%.
Fitch's Prime Credit Card Index was established in 1991 and tracks approximately $143.3 billion of prime credit card ABS backed by over $221.7 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 stayed healthy for the month of August as MPR and gross yield improved, and chargeoffs held steady. Fitch's Retail Credit Card MPR Index increased to 15.83% for the month of August. The index is 2.46% higher YOY. Fitch's Retail Credit Card Gross Yield Index also improved to 29.70% (its third highest value historically). Fitch's Three-Month Average Excess Spread Index improved to 19.15%. Fitch's Retail Credit Card Chargeoff Index held steady for the month, increasing one bp to 6.32%. Fitch's 60+ Day Delinquency Index rose this month to 2.38% and is now approximately 4.85% higher than prior year levels.
Fitch's Retail Credit Card Index was established in 2004 and tracks approximately $20.1 billion of retail or private label credit card ABS backed by over $27.3 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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