Credit card Asset-Backed Securities (ABS) metrics for the February reporting period will weaken slightly in line with seasonal trends, but should remain near record levels of strength. The Monthly Payment Rate (MPR) fell to 27.36% in January and will likely slightly decline through the first quarter due to seasonal trends.
Fitch Ratings says Prime charge-offs will likely rise after decreasing by 14 bps to 2.67% in January. Prime 60+ day delinquencies will likely tick up.
Retail metrics, including private label cards should also weaken slightly over the near term. Charge-offs will rise in line with their seasonal trends, while 60+ day delinquencies may decline slightly. Retail gross yield will also rise in line with its seasonal trends and the MPR is expected to decrease slightly.
Over the long term, if rates rise faster than we anticipate, credit card securitizations could see some increases in delinquencies and charge-offs as consumers become pressured by higher required payments on their overall variable-rate debt obligations. However, we feel the impact on delinquencies and chargeoffs will be minimal given the level of postcrisis deleveraging and the flexibility consumers have to cut back on card payments if necessary.
Additionally, Fitch says improvement in the US labor market should continue to support credit card ABS collateral metrics as we expect labor force participation to rise as more jobs are created. The Bureau of Labor Statistics reported this month that the unemployment rate had decreased to 5.5%, while the labor force participation rate continues to indicate some slowing in its declines, holding at just below 63% in February.
CC ABS MPR
Aug 2014: 27.0%
Sept 2014: 28.3%
Oct 2014: 26.8%
Nov 2014: 27.6%
Dec 2014: 28.7%
Jan 2015: 27.4%
Source: Fitch Ratings
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