Fitch: Strong Labor Market Keeps U.S. Credit Card ABS in Range
U.S. credit card ABS performance remains healthy as the job market continues its positive streak in 2015, according to the latest monthly index results from Fitch Ratings.
The Commerce Department reported that U.S. Gross Domestic Product (GDP) grew at an annualized 2.1% for third quarter-2015 (3Q'15) after an initial anticipated 1.5% growth (driven mostly by consumer spending). While still lower than 3.9% for 2Q'15, this is the sixth consecutive quarter of GDP growth. In addition, initial jobless claims have continued to clock in below the 300,000 level. The Bureau of Labor Statistics reported that four-week average jobless claims stayed at 271,000 for the week ended November 14, well within the range of a robust job market. The unemployment rate declined to an even 5% this month, continuing the downward trend Fitch has seen in 2015.
Prime credit card metrics mostly remained stagnant this month after a month of improvement in October. Fitch's Prime Credit Card Chargeoff Index was up slightly to 2.50% after reaching a new historic low last month. Current performance remains approximately 79% lower than its peak in September 2009. 60+ Day Delinquencies increased this month to 1.03% after a historic streak of falling below 1% for five months. The index is 6.46% lower year-over-year (YOY), and is well below the historical high of 4.54% reached in December 2009. Late stage delinquencies appear to be normalizing after a historic streak of falling below 1%.
Fitch's Prime Credit Card Monthly Payment Rate (MPR) Index improved to 27.97% this month. Current performance is 1.34% higher YOY. Fitch's Prime Credit Card Gross Yield Index remained steady this month, decreasing one basis-point this month to 18.92%. Fitch's Prime Credit Card Three-Month Excess Spread Index increased to 13.97%, close to the index's historical high of 14.10% reached in October 2015. The index is 4.02% higher YOY.
Fitch's Prime Credit Card Index was established in 1991 and tracks approximately $141.7 billion of prime credit card ABS backed by approximately $237.4 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 slipped this month with the exception of excess spread. Fitch's Retail Credit Card Chargeoff Index increased to 6.46% after five consecutive months of improvement. Current performance is still 51.8% lower than its all-time high of 13.41% from March 2010.
Fitch's Retail Credit Card Three-Month Excess Spread Index improved slightly to 19.43%. The Three-Month Excess Spread index has now reached a historical high for the third straight consecutive month, and is 6% higher YOY.
Fitch's Retail Credit Card 60+ Day Delinquency Index ticked up to 2.46% for the month of November. The index is 6.46% lower YOY. Fitch's Retail Credit Card Gross Yield fell for the month of November to 28.57% while Fitch's Retail Credit Card MPR increased to 15.63%. This Fitch's Retail Gross Yield Index is 6.41% higher YOY, while Fitch's Retail MPR index is 2.19% lower YOY.
Fitch's Retail Credit Card Index was established in 2004 and tracks approximately $19.5 billion of retail or private label credit card ABS backed by approximately $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'.
Stephanie Lobaccaro, +1-212-908-0769
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
Herman C. Poon, +1-212-908-0847
Sandro Scenga, +1-212-908-0278