Credit Card ABS Collateral Performance Continues Improving

by: Research Recap

U.S. credit card ABS collateral performance measures began the new year with continued across-the-board improvements in performance, according to the latest index results from Fitch Ratings.

Chargeoffs, delinquencies, and excess spread all improved to extend the positive trends that began last summer. Riding a year-long string of improving delinquency trends, chargeoffs fell below 9% for the first time in 20 months helping excess spread levels top 10% for the first time ever.

‘Though still elevated, credit trends are pointing in the right direction for U.S. card portfolios,’ said Managing Director Michael Dean. ‘Further gains on the labor front could drive more meaningful consumer credit quality improvement in first half 2011.’

ABS ratings on both prime and retail credit card trusts are expected to remain stable given available credit enhancement, loss coverage multiples, and structural protections afforded investors.

Fitch’s Prime Credit Card Chargeoff Index for December dropped to 8.99% for the period, which covers the November collection period. The chargeoff index is now 238 basis points (bps) lower than the all time high of 11.37% set in February 2010 and is down 16% year over year. Chargeoff rates remain persistently high by historical standards, as the index averaged just over 6% for much of the last 20 years.

For details, see: 2011 Begins On Strong Note for U.S. Credit Card ABS