Fitch: Record Low Credit Card Delinquencies Despite Mixed Economic Indicators
U.S. credit card ABS metrics remain healthy, as prime credit card delinquencies fell for a second month in July to unprecedented levels, according to the latest monthly index results from Fitch Ratings.
The positive trend falls against a backdrop of mixed economic indicators, with jobless claims and personal bankruptcies falling to record lows despite tepid consumer confidence.
The Department of Labor's initial jobless claims indicate a strong job market and a strengthening economy. Initial jobless claims for the week of July 18 fell to 255,000, reaching their lowest level in 42 years, while the four-week average fell 4,000 to 278,500. Personal bankruptcy filings exceeded Fitch's expectations, falling 11.6% during first half 2015 relative to the same period one year earlier. Bankruptcies are on track to decline for a fifth straight year.
However, weaker consumer confidence balanced the optimism, with the Conference Board's index down to 90.9 in July from 101.4 in June.
Fitch expects credit card ABS metrics will continue their streak of strong performance as the labor market continues to strengthen.
Fitch's Prime Credit Card 60+ Delinquency Index decreased for the fourth month in a row, from 0.98% in June to 0.95% in July. Delinquencies have now fallen below 1% for two months in a row, reaching that benchmark only three times historically, and have reached historical lows two months in row. Current performance remains 79% below its peak level in December 2009.
The Prime Monthly Payment Rate (MPR) Index also improved for the second consecutive month, to 28.25%. This is 4.32% higher than the same period last year and well above its historical average of 17.64%.
Fitch's Prime Credit Card Gross Yield decreased slightly in July, now at 19.19%. This is 2.29% higher than the same period last year. Fitch's Prime Three-Month Excess Spread Index dipped to 13.87% in June, up 5.08% year over year (YOY).
Fitch's Prime Credit Card Chargeoff Index declined to 2.64% in July. The index is 7.69% 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 $143.5 billion of prime credit card ABS backed by approximately $246.7 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 metrics also continued their strong performance in July. Fitch's Retail Credit Card 60+ Day Delinquency Index held steady at its historical low of 2.14% while Fitch's Retail Credit Card Chargeoffs declined by 3.26% month over month. The index is slightly higher YOY, but is still 53.5% lower than its all-time high of 13.41% reached in March 2010.
Fitch's Retail Credit Card Gross Yield Index climbed to 27.43 for the month of July. During the same period, Fitch's Retail Three-Month Excess Spread Index decreased 2.35% to 17.49%. Fitch's Retail Credit Card MPR Index also improved 1.13% from the month of June to 16.04%.
Fitch's Retail Credit Card Index was established in 2004 and tracks more than $20.8 billion of retail or private label credit card ABS backed by over $29.6 billion of principal receivables. The index is primarily compoised 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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