BOC Rate Cut
Bank of Canada sent shock waves last night when it decided to cut overnight rates to 75 basis points (bps). This may have impact on Canadian credit card ABS.
Job-Loss/COF Back on the Skids
The job loss rate is slipping again. After a steep drop-off to a 9.2% unemployment rate in September, the lowest since 2009, November posted a rise in unemployment to 9.8% of the workforce. The corresponding credit card charge off rate is a clear indication of this. After having skyrocketed to 10.93% in March of 2010 and having nosedived from 10.03 in August to 8.9% in September, credit card charge-offs are also increasing to now sit at 10.19%. This follows months of soaring past the 6% mark in December of 2008, the 8% mark that following spring, and finally the 10% mark in September of ’09, comes as sweet relief to rampant fear last year credit card-backed securities would realistically near 12% by this time. According to CardData (www.carddata.com), average charge-offs for the first quarter were an unprecedented 10.93% with an unemployment rate of 10.2%, which is not far off from the what is now the current situation. Card delinquency rates, however, continue to improve and are down from the year ago figure of 1.09% and the previous quarter figure of 0.92% to 0.83%. For complete details on credit card charge-offs visit Carddata.com (www.carddata.com).
Unemployment Charge-Offs
Jun/08: 5.7% 5.3%
Sep/08: 6.0% 5.5%
Dec/08: 7.1% 6.0%
Mar/09: 9.0% 8.7%
Jun/09: 9.7% 9.5%
Sep/09: 10.4% 10.1%
Dec/09: 9.7% 10.6%
Mar/10: 10.2% 10.93%
Jun/10: 9.6% 10.28%
Sep/10: 9.2% 8.9%
Nov/10 9.8% 10.19%
Source: CardData (www.carddata.com)
Credit Card Chargeoffs Stay Over 10%
Credit card chargeoffs stay on the wrong side of the 10% threshold while delinquencies improved for the ninth straight month. Late stage delinquencies decreased by 6 bps to 3.5% and early stage delinquencies were also down by 1 bps to 4.61%. This, according to the latest Credit Card Index results from Fitch Ratings, also indicated monthly payment rate (MPR) performance continues stability, but slowed slightly in September for a small decrease of 15 bps to 19.65%. MPR still represented a 9% increase compared to the year ago period and is at the third highest level since the beginning of 2008. According to CardData.com, the credit card charge off rate took a steep nosedive from 10.03 in August to 8.9% after having skyrocketed to 10.93% in March of 2010, after having soaring past the 6% mark in December of 2008, the 8% mark that following spring, and finally the 10% mark in September of ’09. This comes as a relief to rampant fear last year credit card-backed securities would realistically near 12% by this time. Also, average charge-offs for the first quarter were an unprecedented 10.93%. Charge-offs are expected to continue declining into 1H/11, thanks to credit card issuers having already written off balances from borrowers with weak credit over the past couple of years and tightening underwriting standards. For complete details on credit card charge-offs visit Carddata.com (www.carddata.com).
COFS HISTORICAL
Jun/08: 5.3%
Sep/08: 5.5%
Dec/08: 6.0%
Mar/09: 8.7%
Jun/09: 9.5%
Sep/09: 10.1%
Dec/09: 10.6%
Mar/10: 10.93%
Jun/10: 10.28%
Sep/20: 10.19%
Source: CardData
(www.carddata.com)
September Unemployment & COF Drop Steeply
The job loss rate in September hit the brakes and dropped steeply to
a 9.2% unemployment rate, the lowest since 2009. The corresponding
credit card charge off rate, after having skyrocketed to 10.93% in March
of 2010- at which point unemployment was at 10.2%- and lazily meandering
its way back to earth, took a steep nosedive from 10.03 in August to
8.9%. This follows months of soaring past the 6% mark in December of
2008, the 8% mark that following spring, and finally the 10% mark in
September of ’09, comes as sweet relief to rampant fear last year credit
card-backed securities would realistically near 12% by this time.
According to CardData (www.carddata.com), average charge-offs for the
first quarter were an unprecedented 10.93% with an unemployment rate of
10.2%. With this, Moody’s expects charge-offs to continue declining
into 1H/11, thanks to credit card issuers having already written off
balances from borrowers with weak credit over the past couple of years
and tightening underwriting standards. Meanwhile, with the unemployment
improving, so too are card delinquency rates, down a full percentage
point year-over-year to 4.65%. For complete details on credit card charge-offs visit Carddata.com
(www.carddata.com).
Unemployment Charge-Offs
Jun/08: 5.7% 5.3%
Sep/08: 6.0% 5.5%
Dec/08: 7.1% 6.0%
Mar/09: 9.0% 8.7%
Jun/09: 9.7% 9.5%
Sep/09: 10.4% 10.1%
Dec/09: 9.7% 10.6%
Mar/10: 10.2% 10.93%
Jun/10: 9.6% 10.28%
Sep/20: 9.2% 8.9%
Source: CardData (www.carddata.com)
Card Chargeoffs Over 10% Once Again
August U.S. credit card ABS chargeoffs were higher and once again crossed the 10% threshold to 10.37% and 10.03%, according to the latest “Prime Credit Card Chargeoff Index” from Fitch Ratings and “Moody’s: Credit card charge-offs higher in August, but signs of improvement continue,” respectively. This demonstrates a 58 basis point (bp) increase from the previous month while Bank of America, Chase, Capital One, Citibank and Discover, all reported higher default rates for the month. Despite the August increase, the charge-off rate is now below the 10% mark at 9.55% on a three-month rolling average basis for the first time since May 2009. In July, the credit card charge off rate continued to slow after climbing for 2 years straight and was down to 8.1%. This was after months of first soaring past the 6% mark in December of 2008, the 8% mark that following spring, and finally the 10% mark in September of ’09 and relieved fears credit card-backed securities would realistically near 12% by this time. This follows average charge-offs in 1Q/10 having reached an unprecedented 10.93% in March, According to CardData (www.carddata.com). For complete details on credit card charge-offs visit Carddata.com (www.carddata.com).
Charge-Offs
JUN 08: 5.3%
SEP 08: 5.5%
DEC 08: 6.0%
MAR 09: 8.7%
JUN 09: 9.5%
SEP 09: 10.1%
DEC 09: 10.6%
MAR 10: 10.9%
JUN 10: 10.3%
JUL 10: 8.1%
AUG 10: 10.2%
Source: CardData
(www.carddata.com)
Credit Card Charge Off Rate Falls to 8.1%
The credit card charge off rate has continued to slow after climbing for 2 years straight and now stands at 8.1%. This, after months of soaring past the 6% mark in December of 2008, the 8% mark that following spring, and finally the 10% mark in September of ’09, offers continued relief to rampant fear last year credit card-backed securities would realistically near 12% by this time. This follows average charge-offs in the first quarter having reached an unprecedented 10.93% in March, According to CardData (www.carddata.com). Moreover, Capital One international cards COF hit 7.86% in July compared with 8.3% in June; Discover COF declined to 7.28% from 8% in June; Chase net credit losses fell to 7.88% from 8.32% in June; the BofA charge-off rate fell to 11.39% from 11.98% in June and American Express said its charge-off rate fell to 5.5% from 5.7% in June. In Recent Months, skyrocketing card charge-offs have improved and will hopefully continue to recede far enough from the dreaded 11% mark. For complete details on credit card charge-offs visit Carddata.com (www.carddata.com).
Charge-Offs
JUN 08: 5.3%
SEP 08: 5.5%
DEC 08: 6.0%
MAR 09: 8.7%
JUN 09: 9.5%
SEP 09: 10.1%
DEC 09: 10.6%
MAR 10: 10.9%
JUN 10: 10.3%
JUL 10: 8.1%
Source: CardData
(www.carddata.com)
COF & Unemployment Slow, Linger at 10%
The job loss rate in June slowed to a 9.6% unemployment rate.
Coincidentally, the credit card charge off rate slowed for the first
time in two years to now stand at 10.28%. This, after months of soaring
past the 6% mark in December of 2008, the 8% mark that following spring,
and finally the 10% mark in September of ’09, comes as sweet relief to
rampant fear last year credit card-backed securities would realistically
near 12% by this time. According to CardData (www.carddata.com), average
charge-offs for the first quarter were an unprecedented 10.93% with an
unemployment rate of 10.2%. With a 9.6% unemployment rate for June,
second quarter managed charge-offs are expected to hover around 10.2%.
With the unemployment rate showing signs of improvement, skyrocketing
card charge-offs have done the same and will hopefully not hit the
dreaded 11% mark. For complete details on credit card charge-offs visit
Carddata.com (www.carddata.com).
Unemployment Charge-Offs
Jun/08: 5.7% 5.3%
Sep/08: 6.0% 5.5%
Dec/08: 7.1% 6.0%
Mar/09: 9.0% 8.7%
Jun/09: 9.7% 9.5%
Sep/09: 10.4% 10.1%
Dec/09: 9.7% 10.6%
Mar/10: 10.2% 10.93%
Jun/10: 9.6% 10.28%
Source: CardData (www.carddata.com)
Delinquency Starts 2010 on a Sour Note
The uptick of credit card delinquencies for U.S. credit card asset-backed securities is setting the stage for record charge-offs for 2010. However, gross yield, the measure of interest, fees and interchange revenue collected on outstanding balances, continued to increase reaching 20.21%. Fitch’s latest “Credit Card Performance Indexes,” which tracks the performance among most of the U.S. credit card-backed bonds, shows late payments rising to their highest levels in six months. Measured by Fitch’s 60+ day delinquency index, late payments rose 13 basis points in November to 4.54% following a similar increase last month. Charge-offs crept up to 10.68% from 10.09% in the prior month but remained inside of the record high of 11.52% set in September 2009. From 4Q/08 through 2Q/09, Fitch’s delinquency index rose 42% as the economic environment and employment situation worsened. Charge-offs subsequently peaked in 3Q/09 with Fitch’s index reaching 11.52% in September 2009 before receding in recent months. Monthly payment rates, a measure of how quickly consumers are paying off their card balances, fell to 17.64% from 18.57% last month. These MPRs are low compared to 2006 and 2007 when the MPR index routinely topped 20%, but are still strong compared to the average MPR of 16.00% since the inception of the index in 1991.
ABS 60+ DAY DELINQUENCY
Jan 09: 4.04%
Feb 09: 4.33%
Mar 09: 4.44%
Apr 09: 4.37%
May 09: 4.45%
Jun 09: 4.31%
Jul 09: 4.26%
Aug 09: 4.06%
Sep 09: 4.22%
Oct 09: 4.41%
Nov 09: 4.54%
Source: FitchRatings
OCT ABS
Charge-offs amongst credit card-backed securities remained in double digits for the fourth consecutive month in October. However, delinquency edged upward after four straight months of decline and after surging to a record 5.5% in May. The 60-to-180 day delinquency rose by 10 basis points in October to 4.9%. But, the Fitch “Charge-Off Index” stayed level at 11.4%. The Fitch “Monthly Payment Rate Index” dropped again in October to 16.2% from 16.9% in September. Month-on-month, the Fitch “Yield Index” dropped 20 basis points in October to 21.2% from 21.4% the previous month, although on a quarterly and annual basis, the Fitch “YI” registered an increase of 40 bps and 50 bps, respectively. Fitch noted that major blow was dealt to millions of bank customers, after a Supreme Court judgment overruled earlier court rulings that would have allowed the Office of Fair Trading to investigate the fairness of bank charges on overdrafts.
Credit Card ABS Metrics Improve Tepidly in Oct
Fitch Ratings has published ‘Credit Card Movers & Shakers’ containing October 2009 performance.
Late payments on outstanding U.S. credit card balances rose again in October, falling just shy of record highs as U.S. consumers continue to struggle with debt loads amid the weak employment situation.
Detailed in Fitch’s latest Credit Card Performance Indexes, the results show late payments rising to their highest levels in five months and indicate higher chargeoffs in the months to come.
However, during October, Fitch’s Credit Card Chargeoff Index declined 66 bps to 10.09%, marking the third consecutive improvement. The three-month average excess spread also showed further improvement, increasing by 50 bps to 6.25% for the fourth consecutive month to its highest level since October 2008.
Despite the ongoing unfavorable trends, Fitch expects continued stability for current ratings of senior credit card ABS tranches given available credit enhancement and structural protections afforded to investors. The outlook for subordinate tranches remains negative. Fitch expects U.S. unemployment will peak at 10.3% in second-quarter 2010 and remain above 10% throughout 2010.
‘Credit Card Movers & Shakers’ is available on the Fitch Ratings web site at ‘www.fitchratings.com’ under the following headers:
Structured Finance then ABS then Newsletters
Additional information is available at ‘www.fitchratings.com’.
U.S. Credit Card Delinquency Surges Higher
One-year after the credit meltdown it appears credit card delinquency
is gaining momentum and setting the stage for record charge-offs for the
first and second quarters of 2010. The two-year old recession is taking
its toll as more Americans are running out of cushion in emergency
savings and home equity. Fitch’s latest “Credit Card Performance
Indexes,” which tracks the performance among most of the U.S. credit
card-backed bonds, shows late payments rising to their highest levels in
five months. Measured by Fitch’s 60+ day delinquency index, late
payments rose 19 basis points to 4.41% following a similar increase last
month. Early stage late payments increased for the month as well, with
30+ day delinquencies rising 21 bps. Late stage delinquencies are now
31% higher than year-earlier levels and just below the record high of
4.45% set this past June. However, Fitch’s “Credit Card Charge-off
Index” declined 66 bps to 10.09% in October, marking the third
consecutive improvement. Despite the improvement, charge-offs remains
55% above year-earlier levels. Fitch says consumer credit quality
remains under significant strain as a result of the persistent weakness
in the labor markets.
ABS 60+ DAY DELINQUENCY
Jan 09: 4.04%
Feb 09: 4.33%
Mar 09: 4.44%
Apr 09: 4.37%
May 09: 4.45%
Jun 09: 4.31%
Jul 09: 4.26%
Aug 09: 4.06%
Sep 09: 4.22%
Oct 09: 4.41%
Source: FitchRatings
Spending & CARD Act are Keys to Profitability
Among credit card-backed securities, yield and the monthly payment rate declined in September. Charge-offs declined for the second time in three months, while delinquencies resumed their upward trend.
FitchRatings says that near-term profitability for U.S. credit card issuers will remain challenged by credit and spend volume, with longer-term earnings prospects dependent on each issuer’s ability to adapt to new legislation. Purchase volumes were relatively flat in the third quarter from the prior quarter but were down 13.7% annually on average at the top six card issuers. During September Fitch’s “Credit Card Charge-off Index” declined 77 basis points to 10.75%. Delinquency (60+ days) edged up to 4.2%. Yield declined 27 basis points to 10.39% and the monthly payment rate declined from 18.19% in August to 17.98% in September. Fitch notes that under the “CARD Act”, the inability to re-price existing balances will necessitate higher rates for all cardholders, credit availability will decline, with tighter underwriting criteria and reduced credit lines and competition in the prime market is likely to intensify.
ABS METRICS
YIELD MPR
Sep 08: 17.13% 18.57%
Oct 08: 17.05% 18.42%
Nov 08: 17.01% 15.96%
Dec 08: 17.21% 17.27%
Jan 09: 16.00% 17.15%
Feb 09: 16.83% 15.78%
Mar 09: 17.66% 16.48%
Apr 09: 18.01% 16.98%
May 09: 17.94% 17.16%
Jun 09: 17.95% 18.85%
Jul 09: 19.35% 18.56%
Aug 09: 19.66% 18.19%
Sep 09: 19.39% 17.98%
Source: FitchRatings