BofA Posts a $1.6B Loss for Global Cards

Bank of America global credit cards posted a $1.6 billion loss in the second quarter compared to a $582 million profit for 2Q/08. Second quarter global cards revenues declined to $7.3 billion, compared to $7.5 billion in the prior quarter and for the second quarter of last year. Second quarter charge-offs rose sharply to 11.73%, compared to 8.62% for 1Q/09 and 5.96% one-year ago. However, the managed 30+ day delinquency ratio decreased to 7.64%, compared to 7.85% in the first quarter and 5.53% for 2Q/08. The managed 90+ day delinquency ratio increased to 4.21%, compared to 3.99% in the first quarter and 5.53% for 2Q/08. Global cards purchase volume declined 19.5% year-on-year to $51.9 billion for the second quarter. For complete details on Bank of America’s 2Q/09 performance, visit CardData (www.carddata.com).

BOFA CREDIT CARD NET INCOME
(Global Cards; Excludes Business Cards)
2Q/08: + $582 million
3Q/08: (-$373 million)
4Q/08: (-$204 million)
1Q/09: (-$1769 million)
2Q/09: (-$1618 million)
Source: CardData (www.carddata.com)

Chase Card Posts $672MM Loss; Charge-Offs Top 10%

Chase’s Card Services unit posted a net loss of $672 million in the
second quarter as charge-offs topped 10%. However, 30+ day delinquency,
the precursor of future charge-offs, eased during the quarter dipping
below the 6% level. Within the WaMu portfolio, charge-offs hit 19.17%,
compared to 14.57% in the first quarter and 12.09% at year-end 2008.
End-of-period managed loans were $171.5 billion, an increase of 10% from
the prior year, but down 3% from the prior quarter. Charge volume was
$82.8 billion, a decrease of 12% from the prior year. Excluding
Washington Mutual, charge volume was
$78.3 billion, a decrease of 16%. The managed net charge-off rate for
the quarter was 10.03%, up from 4.98% in the prior year and 7.72% in the
prior quarter. The 30-day managed delinquency rate was 5.86%, up from
3.46% in the prior year and down from 6.16% in the prior quarter.
Excluding Washington Mutual, the managed net charge-off rate
for the second quarter was 8.97% and the 30-day delinquency rate was
5.27%. Merchant processing volume was $101.4 billion, on 4.5 billion
total transactions processed. Chase also noted that ROE was negative
18%, down from positive 7% in the prior year and that ROO was negative
2.46%, compared with positive 1.04% in the prior year and negative 1.92%
in the prior quarter. For complete details on Chase’s second quarter
performance visit CardData (www.carddata.com).

Cap One Delinquency Declines for 4th Month

The bad news is that Capital One charge-offs neared double digits in
June, but the good news is delinquency declined for the fourth
consecutive month. The charge-off ratio rose from 9.41% in May to 9.73%
for June. However, the May figure was about 50 basis points lower due to
a recent change in the issuer’s bankruptcy policy. U.S. Card delinquency
declined from 4.90% in May to 4.73% for June. Managed loans at the end
of June decreased to $64.8 billion. Last month Capital One noted that
its internal guidelines require bankrupt accounts to be charged off
within 30 days and its practice had been to charge-off customer accounts
within 2 to 3 days of receiving notification of bankruptcy. Therefore,
the issuer extended the processing window to improve the efficiency and
accuracy of bankruptcy-related charge-off recognition. Capital One
previously reported that the U.S. Card charge-off rate increased to 8.4%
for the first quarter. The issuer will release its second quarter report
on April 23rd after the market close. For complete details on Capital
One’s first quarter and monthly performance, visit CardData
(www.carddata.com).

CAPITAL ONE HISTORICAL
DELINQUENCY CHARGE-OFF
Jun 08: 3.85% 6.42%
Jul 08: 3.96% 6.08%
Aug 08: 4.07% 5.96%
Sep 08: 4.20% 6.34%
Oct 08: 4.48% 6.54%
Nov 08: 4.70% 6.98%
Dec 08: 4.78% 7.71%
Jan 09: 5.02% 7.82%
Feb 09: 5.10% 8.06%
Mar 09: 5.08% 9.33%
Apr 09: 5.04% 8.56%
May 09: 4.90% 9.41%
Jun 09: 4.77% 9.73%
Source: CardData.com

Managed Charge-Offs May Near 11% by 2010

The momentum in job losses for June could push the unemployment rate to nearly 11% by year-end and drive average credit card charge-offs well above 10%. Losses among credit card-backed securities passed the 10% milestone in May and could realistically near 12% by 2010. According to CardData (www.carddata.com), average charge-offs for the first quarter were 8.7% with an unemployment rate of 9.0%. With a 9.7% unemployment rate for June, second quarter managed charge-offs are expected to hover around 9.5%. If unemployment tops 10% by September then credit card charge-offs will likely cross the unprecedented 10% line too. Among the nation’s top issuers with at least $50 billion in outstandings, the average charge-off rate for 1Q/09 was 8.12%, compared to 6.51% in the fourth quarter and 4.84% for 1Q/08. For credit card backed securities in May, S&P reports a 10.00% charge-off ratio while Moody’s reports a 10.62% rate and Fitch a 10.44% ratio. (CF Library 6/10/09; 7/10/09)

Unemployment Charge-Offs
Mar/08: 5.2% 4.6%
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: 10.9% 10.6%
Source: CardData (www.carddata.com)

Card Industry Braces for June/ Q2 Metrics

The magnitude of record setting charge-offs in the second quarter will
be realized next week as Capital One and American Express release June
performance metrics and other issuers begin to report Q2 statistics.
Based on figures through May, charge-offs are up 16% among credit
card-based ABS and up 10% industry wide since March 31st. For credit
card backed securities in May, S&P reports a 10.00% charge-off ratio
while Moody’s reports a 10.62% rate and Fitch a 10.44% ratio. The three
rating firms include Discover and American Express performance. CardData
(www.carddata.com), which excludes Discover and American Express,
reports an industry wide revised managed ratio of 9.51% for May.
American Express reported its charge-off ratio edged down from a peak of
10.1% in April to 10.0% for May, thanks to the sale of some cardholder
loans that had been previously written-off. Capital One reported that
its charge-off ratio rose from 8.56% in April to 9.41% for May, however
the figure was about 50 basis points lower due to a change in the
issuer’s bankruptcy policy. Discover reported a managed net charge-off
rate for the quarter ending May 31st of 7.79%, up 131 basis points and
280 basis points from the prior quarter and the prior year,
respectively. (CF Library 6/18/09)

2009 GENERAL PURPOSE CREDIT CARD LOSSES
Fitch Moody’s CardData*
Jan 7.40% 7.74% 6.95%
Feb 8.41% 8.24% 7.11%
Mar 8.89% 9.30% 8.67%
Apr 9.66% 9.97% 8.78%
May 10.44% 10.62% 9.51%
*excludes American Express and Discover

U.K. Credit Card Charge-Offs Rise Above 9%

Delinquency and charge-offs among credit card-backed securities in the United Kingdom hit record highs again in May. Charge-offs increased 50 basis points while 60-to-180 day delinquency nudged up by 20 basis points. The Fitch “Charge-off Index” increased for the fourth straight month in May to 9.1%, compared to 8.6% in the prior month and 6.4% one-year ago. Fitch says it is particularly concerned that the increase in charge-offs is a result of the increased roll-through of delinquencies, with the stress on consumer payments brought about by the deterioration in the UK economy expected to continue throughout 2009. In May, the Fitch “Delinquency Index” increased for the ninth month in a row, moving to 5.5% from 5.3% in April and 3.7% in May 2008. On an individual trust basis, six of the eight trusts included in the “Index” reported new historical high delinquency levels in May. Fitch also reports that its “Monthly Payment Rate Index” fell 10 basis points in May to 15.4%. However, the Fitch “Yield Index” increased to 20.0% in May, compared to 19.4% in April.

U.K. CREDIT CARD ABS
Delinquency Charge-Offs
May 08: 3.7% 6.4%
Jun 08: 3.7% 6.9%
Jul 08: 3.7% 6.5%
Aug 08: 3.7% 6.3%
Sep 08: 3.8% 6.6%
Oct 08: 3.9% 6.6%
Nov 08: 4.1% 6.4%
Dec 08: 4.3% 7.2%
Jan 09: 4.5% 6.8%
Feb 09: 4.8% 7.5%
Mar 09: 5.0% 8.4%
Apr 09: 5.3% 8.6%
May 09: 5.5% 9.1%
Source: FitchRatings

Retail Card Charge-Offs Near 13% Level in May

Fitch Ratings has published the July edition of ‘Credit Card Movers & Shakers’. Credit card delinquencies and charge-offs breached record levels in May as U.S. consumers continued to fall behind and default on their credit cards at record rates. Although excess spread is compressing, the ratings on many trusts have remained stable as issuers have added more credit enhancement and turned on the discount option in order to deal with the souring economy. In addition to latest credit card performance trends, this edition summarizes some of the more recent issuer actions and includes a list of trusts in which excess spread trapping is occurring.

‘Credit Card Movers & Shakers’ is available on the Fitch Ratings web site at www.fitchratings.com under the following headers:

Structured Finance >> ABS >> Newsletters

Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch’s code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the ‘Code of Conduct’ section of this site.

MAY ABS

Delinquency and charge-offs amongst credit card-backed securities hit record highs again in May. Charge-offs leapt 50 basis points while 60-to-180 day delinquency nudged up by 20 basis points. The Fitch “Charge-off Index” increased for the fourth straight month in May to 9.1%, compared to 8.6% in the prior month and 6.4% one-year ago.
Fitch says it is particularly concerned that the increase in charge-offs is a result of the increased roll-through of delinquencies, with the stress on consumer payments brought about by the deterioration in the UK economy expected to continue throughout 2009. In May, the Fitch “Delinquency Index” increased for the ninth month in a row, moving to 5.5% from 5.3% in April and 3.7% in May 2008. On an individual trust basis, six of the eight trusts included in the “Index” reported new historical high delinquency levels in May. Fitch also reports that its “Monthly Payment Rate Index” fell 10 basis points in May to 15.4%. However, the Fitch “Yield Index” increased to 20.0% in May, compared to 19.4% in April.

Credit Card ABS Charge-Offs Top 10% in May

Charge-offs among credit card-backed securities logged another record in May topping the 10% milestone. However, the delinquency ratio declined for the second consecutive month. The latest “Moody’s Credit Card Index” shows 30+ day delinquency dropped to 5.97% from 6.34% in April. However, Moody’s says the improvement is an expected seasonal phenomenon arising from the tax refund season and fully expects delinquencies to resume their upward trend. Charge-offs rose to 10.62% in May from 9.97% in April and 6.41% a year earlier. The May “Index” also shows payment rates slipping for the second consecutive month, to 16.01% from 16.20% in the prior month. The yield index rebounded from last month’s sharp decline, returning above the 18% level and reflecting discounting initiatives by Citibank and Bank of America. However the increase was not enough to keep excess spread levels from falling below the 5% level for the first time since 1998.

Credit Card ROAA Slides for 12th Straight Month

The “Return on Average Assets” for the U.S. credit card industry continues to sink in 2009, marking its 12th consecutive monthly decline in May. The record low of 27 basis points compares to 31 basis points in April and 215 basis points one-year ago. According to CardData, the ROAA for Visa and MasterCard portfolios peaked in February 2007 at 263 basis points. ROAA is determined by dividing the after-tax return by the average managed card outstandings and then annualizing. According to
R.K. Hammer Investment Bankers, pre-tax profit for the U.S. credit card industry declined 2.7% in 2008 to $39.6 billion driven by rising expense streams, especially charge-offs. Bank of America reported that its “Return on Average Equity” for its Global Card business dropped to a negative 17.90% in the first quarter, compared to 0.26% in the fourth quarter and 9.18% in the 1Q/08. Chase Cards posted a pretax “Return on Average Managed Outstandings” of -1.92% for 1Q/09, compared to -1.16% in the prior quarter and +2.52% for the first quarter of 2008. Citi’s North American cards unit report a “Return on Managed Assets” for the first quarter of -0.55%, compared to -0.92% in 4Q/08 and +1.32% for the year ago quarter. For the latest portfolio metrics visit CardData (www.carddata.com).

RETURN ON AVERAGE ASSETS
May 08: 2.15%
Jun 08: 2.02%
Jul 08: 2.00%
Aug 08: 1.48%
Sep 08: 1.11%
Oct 08: 1.04%
Nov 08: 0.95%
Dec 08: 0.88%
Jan 09: 0.79%
Feb 09: 0.68%
Mar 09: 0.61%
Apr 09: 0.31%
May 09: 0.27%
Source: CardData (www.carddata.com)

V/MC Settlement Produces a Discover 2Q/09 Profit

Discover’s U.S. Card unit reported that pretax income for the quarter
ending May 31st rose 26%, compared to one-year ago, and more than double
the prior quarter, due largely to income from its antitrust settlement
with Visa and MasterCard. However, outstandings were flat sequentially,
volume declined by 4% year-on-year and charge-offs may approach 9% in
the third quarter. Pretax income was $387.9 million in the second
quarter as compared to $309.1 million for the second quarter of 2008.
Proceeds from the Visa and MasterCard settlement were $473 million
pretax for the quarter. Sales volume in the second quarter declined 4%
from the prior year to $24.3 billion. Sales volume declined 8% in the
prior quarter. Managed loans ended the quarter at $51 billion,
essentially unchanged from the prior quarter and up 7% from the prior
year, reflecting lower cardholder payments and growth in both personal
and student loans, partially offset by decreased consumer spending. The
over 30 days delinquency rate on managed loans was 5.08%, down 17 basis
points from the first quarter and up 127 basis points from the prior
year. The managed net charge-off rate increased to 7.79% for the second
quarter, up 131 basis points and 280 basis points from the prior quarter
and the prior year, respectively. Third-Party Payments segment volume
grew 25% from the prior year to $37 billion, including $6 billion of
Diners Club International volume. Net yield on loan receivables rose to
9.26%, an increase of 15 basis points from the prior quarter, and 70
basis points from the prior year. The increase from the prior year
reflects lower cost of funds, accretion of balance transfer fees and an
increase in revolving balances, partially offset by higher interest
charge-offs and lower yields on variable rate assets. For complete
details on Discover’s latest performance visit CardData (www.carddata.com).

U.S. CARD PRE-TAX PROFITS
2Q/08: $309.1 million
3Q/08: $245.2 million
4Q/08: $646.4 million
1Q/09: $167.0 million
2Q/09: $387.9 million
Source: CardData (www.carddata.com)