Fitch: Strong Economy Still Bolstering Record U.S. Credit Card Performance
U.S. credit card ABS metrics remain robust, with payment rate and excess spread levels again climbing to historic highs, according to the latest monthly index results from Fitch Ratings.
The positive trend in U.S. credit card ABS performance coincides with strong economic indicators, as the labor market continues to tighten while GDP and consumer confidence trend upwards.
The U.S. economy rebounded from sluggish growth in the first quarter as GDP grew 3.7%, according to the Commerce Department, posting a higher than expected rise. This bodes well for the economy as a whole for the second half of 2015. In addition, the Conference Board Consumer Confidence Index improved in August, rising 10.5 points to 101.5 (its highest level since January). Consumers attributed strong labor market expectations as the main driver of this surge. Meanwhile, the Bureau of Labor Statistics reported four-week average jobless claims to continue its streak of declines, coming in at 272,500 for the week ending August 22. Four-week average jobless claims have been strong throughout 2015 and continue to indicate sustained improvements in the labor market.
Fitch's Prime Monthly Payment Rate (MPR) Index improved for the third consecutive month and broke above the 29% mark, reaching 29.10% and registering a new historical high. The index is 3.01% higher than the same period last year and well above its historical average of 17.68%. Fitch's Prime Three-Month Excess Spread Index also rose to a new record high of 14.10% in August, an improvement of 5.07% year-over-year (YOY). The index is 1.08% higher than its previous historical high of 13.95%, which was reached in June of this year.
Fitch's Prime Credit Card Chargeoff Index declined for the third month to 2.54% in August. 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 60+ Delinquency Index remained in record territory with a one basis point blip to 0.96% from 0.95%. The index has stayed below 1% for the past three months, with current performance remaining 79% below its peak level reached in December 2009.
Fitch's Prime Credit Card Index was established in 1991 and tracks over $146.8 billion of prime credit card ABS backed by approximately $245.1 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 exhibited performance improvements across the board. Fitch's Retail Credit Card Gross Yield Index rose to 28.49% for the month of August, an increase of 3.86% from July and 3% from the same period last year. Fitch's Retail Three-Month Excess Spread Index improved 5.66% from last month to 18.72% and is now 5.11% higher YOY. Fitch's Retail MPR Index improved for the third month in a row, registering at 28.49%.
Fitch's Retail Credit Card Chargeoff Index declined 2.24% to 6.10% for a third straight monthly decline. The index is 2.24% lower month-over-month (MOM) and 54.51% lower than its all-time high of 13.41% from March 2010. Fitch's Retail Credit Card 60+ Day Delinquency Index remained close to its historical low registering 2.19% for the month of August.
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 $29.4 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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