Standard & Poor’s announced this morning it has placed First Consumers National Bank’s credit card-backed securities on CreditWatch with negative implications. Last month, The Spiegel Group, FCNB’s parent, confirmed it is looking to unload its credit card business following rapid deterioration and a significant earnings shortfall in FCNB’s sub-prime credit card portfolio. During the past two years, the underlying pool of FCNB credit card receivables has experienced decreasing yield and payment rates and increasing delinquency and chargeoff rates. As of the February reporting period, the total delinquency rate was at 14.29%, which is 572 basis points higher than January 2000’s delinquency rate of 8.57%. Concurrently, the gross chargeoff rate has increased to its current level of 18.20%, up from 11.90% in January 2000. At the same time, the yield on the portfolio has declined steadily during the same time period, averaging approximately 30% during the past year. This decreasing yield, combined with a relatively static base rate and an increasing chargeoff rate, has negatively affected spread rates, causing it to fall dramatically from its high of 20.60% in July 1999 to its current rate of 5.17% in February 2002. Lastly, the total payment rate displayed by the master trust has also displayed dissipating trends, falling steadily to its current rate of 11.07% from 17.92% in March 1999. The Spiegel Group reported a total loss from discontinued operations of $396.3 million in the fourth quarter, which primarily consists of a $310.5 million anticipated loss on the sale of the credit card portfolio. At year-end 2001, FCNB had $1,269,428,449 in credit card outstandings and 1,073,499 active accounts, according to CardData ([www.carddata.com][1]). (CF Library 2/22/02)
[1]: http://www.carddata.com