Charge-offs, among credit card-backed securities, declined six basis points to 6.79% in June but remained 63 bps above the level of a year ago. Fitch says that despite the drop-off in charge-offs, consumers remain under pressure due to the economic landscape, performance is therefore expected to remain challenged over the near term and worsen later in the second half. Delinquencies declined five basis points in June to 3.49%, its third monthly decline. Bankruptcy filings fell 12.2% month over month in June to 130,242 declining for the third consecutive month. However, year-to-date bankruptcy filings are up 8.6% from the same period last year.
Charge-offs among credit card-backed securities rose 18 bps in April, the highest level since January 1998. According to the Fitch credit card index charge-offs hit 6.73% last month. However, delinquencies moved in the opposite direction falling 8 bps to 3.63%, a possible sign that deterioration in credit quality may give way in the months to come. Although bankruptcy filings declined month over month for the first time in 2003 falling 0.54%, year-to-date filings were up 9.3% from levels one year ago. Fitch expects bankruptcies to increase by roughly 8.0% in 2003 to 1.65 million.
Charge-offs among sub-prime credit card-backed securities soared to a record 18.9% in March, a 102 basis points jump from the prior month. Charge-offs among all credit card-backed bonds increased 25 bps from February and 70 bps since March 2002. According to the Fitch Credit Card Index, credit card charge-offs for all securitizations hit 6.55% in March. Serious delinquency (60+ days) posted a seven-basis-point rise to 3.71%, its highest level since February 1998. Among sub-prime issuers, Providian reported last week that its charge-off rate among its securitizations increased to 19.89% for March, compared to 18.23% for February, and compared to 19.38% for January. Metris/Direct Merchants Credit Card Bank also reported last week that its managed net charge-off rate for the first quarter was 17.9%, compared to 18.2% for the fourth quarter, and 13.0% for 1Q/02.
Hypercom reported this week it has shipped its six millionth card payment terminal with the recent shipment of “T7Plus” terminals with “SureLoad” printing technology to NOVA Information Systems. Hypercom has been celebrating its silver anniversary this week at the ETA Exhibition in Las Vegas. The company was founded by George Wallner in 1978 as a provider of communications products in Australia. It switched to transaction products in 1982. One year later, Hypercom expanded into Asia and, in 1987, it established a U.S. subsidiary in Phoenix. In 1990, the company relocated its headquarters to Phoenix. In 1991, the company expanded into Latin America and in 1996, the firm established operations in Europe. Over the past few weeks the company announced multi-million dollar terminal orders from PayRight, MSI, and Abanco International. Hypercom also announced this week it has named the NJ headquarters of MSI Merchant Services “ISO of the Year” for 2002. (CF Library 3/19/03; 4/1/03: and 4/2/03)
A credit ratings firm has predicted that bankruptcies will increase by roughly 8.0% in 2003 to a level of 1.65 million. Fitch Ratings also expects consumer credit quality to be challenged in the months to come. Meanwhile, for the December collection period, credit card chargeoffs and serious delinquencies moved in opposite directions. Fitch’s 60 days or more delinquency index posted a five-basis-point decline to 3.49%, its lowest level since October, yet 8 bps above prior-year levels. On the other hand, chargeoffs continued their upward movement for the fourth consecutive month. Chargeoffs increased 23 bps to 6.51%, the highest level since April 2002 and 68 bps higher than prior year levels. Sub-prime chargeoffs increased for the fifth month in a row to a level of 18.61%, up 199 bps from the November 2002 collection period and 24.7% from prior-year levels.
New Zealand-based Visible Results announced that Gerald Lewis, the veteran retail and consumer marketing consultant, has resigned as Chairman of Visible Results USA to provide management level consulting to a limited number of U.S. and international companies in the retailing and consumer goods marketing fields. Mr. Lewis joined the Visible Results in May 2001, to guide the introduction of the patented “Visible Results GraphiCard” loyalty technology into the U.S. retailing, food service and hospitality markets. A total of three million individuals worldwide hold loyalty program membership cards based on Visible Results’ “GraphiCard” technology and CRM infrastructure. Transactions completed through all programs total a collective 1.6 million monthly, while worldwide spend through programs has reached US$21 million monthly.
Auckland-based Visible Results announced that Gerald Lewis, the veteran retail and consumer marketing consultant, has resigned as Chairman of Visible Results USA to provide management level consulting to a limited number of U.S. and international companies in the retailing and consumer goods marketing fields. Mr. Lewis joined the Visible Results in May 2001, to guide the introduction of the patented “Visible Results GraphiCard” loyalty technology into the U.S. retailing, food service and hospitality markets. A total of three million individuals worldwide hold loyalty program membership cards based on Visible ResultsÂ “GraphiCard” technology and CRM infrastructure. Transactions completed through all programs total a collective 1.6 million monthly, while worldwide spend through programs has reached US$21 million monthly.
The unexpected decline in economic conditions could exacerbate pressure on the credit card bonds as charge-offs may continue to grow through 2002. Currently, “prime” credit card asset-backed securities are benefiting from healthy levels of excess spread even though charge-offs have risen consistently for more than a year. However, credit deterioration and regulatory concerns have heightened concern within the sub-prime sector as there are few signs of relief evident, according to Fitch Ratings. Fitch’s charge-off index for May declined 21bps to 6.41% from the month earlier, yet increased against May 2001’s 6.04%. Fitch’s delinquency index declined 19 bps from April’s level to 3.29%, an improvement over May 2001 levels that snapped a 28-month string of year-over-year increases. Monthly payment rates slipped to 15.58% for May, versus 16.25% for April, and 15.59% one year ago.
Signs of economic recovery are being tempered by rising chargeoffs and serious delinquencies. The latest credit card numbers validate the long held belief that not only do subprime borrowers default at a higher absolute level, they also deteriorate much more rapidly in stressful environments, even in the relatively brief and shallow one experienced to date. Fitch’s chargeoff index rose to 5.88% from last month’s 5.83%, while the greater than 60 day delinquencies index rose to 3.56% from 3.41%, its highest level in four years. Fitch’s prime credit card charge-off index rose approximately 17% over the past 18 months, while subprime credit chargeoffs increased 38% over the same period. Serious delinquencies in the subprime sector exhibited a similar meltdown, rising nearly 50% over the same period, compared to a 23% increase in prime sector late-stage delinquencies.
Fitch Ratings’ Credit Card Index showed mixed results for the December collection period as credit quality measures continued above prior-year levels. Despite some signs of economic improvement in recent weeks, Fitch anticipates layoffs to continue over the near term as companies try and find ways to restore profitability, a trend that will lead to higher chargeoffs in 2002, according to the latest edition of ‘Credit Card Movers & Shakers’.
‘A prolonged recession may cause households to reign in credit card debt as consumer confidence falls,’ said Rui Pereira, Director, Fitch Ratings. ‘As such, concerns remain focused on consumers’ ability to service their debt through a prolonged downturn, particularly for more vulnerable high-risk consumer segments that have begun to exhibit weakening trends.
Fitch’s Excess Spread Index posted a third straight record high, increasing 0.38 basis point (bp) over last month to 7.44%, while the Chargeoff Index held steady with a decline of 7.0 bps from the prior month. However, Fitch’s Gross Yield Index fell to 18% from month- and year-earlier levels of 18.25% and 19.50%, respectively, its lowest level in almost five years.
For a copy of ‘Credit Card Movers & Shakers’ please visit Fitch’s web site at ‘www.fitchratings.com’ or contact Market Services at 1-800-853-4824.
Fitch NewsAlert, an e-mail notification service, is now available for the monthly ‘Credit Card Movers & Shakers’ report. If you would like to receive e-mail notification on a monthly basis as to the availability of this report, which includes a hyperlink to the adobe acrobat file, please contact Ileana Sayago via e-mail at ‘[email protected]’ or by phone at 1-212-908-0752.
PayPal has linked up with American Express and Discover to offer users more payment options. The company, which is gearing up for an IPO, also announced a new board member. PayPal users will now have the opportunity to earn ‘Membership Rewards’ points while using an AmEx card in conjunction with the P2P email payment service. PayPal users will also have the option of earning ‘Cashback Bonus Awards’ when using the Discover card with PayPal. The company further announced that John Dean, Chairman of Silicon Valley Bancshares and Silicon Valley Bank, has joined the company’s Board of Directors. PayPal members send more than $10 million per day in approximately 200,000 daily transactions. PayPal has a 90% market share of the P2P payment market. To-date PayPal has racked up more than $230 million in losses since it was launched in early 1999. It expects to raise about $80 million in the upcoming IPO. (CF Library 10/01/01; 12/11/01)
Charge-off rates on credit card-backed securities abated last month, halting a nine-month trend of rapidly rising losses. The results were mixed, indicating a steep decline from three-year highs on a month-to-month comparison while worsening on a year-over-year measure for the fifth consecutive month. According to the ‘Fitch Credit Card Performance Indexes’ for the June collection period, charge-offs settled at 6.02%, down from a three-year high of 6.37% last month, and yet still nearly 18% higher versus the 5.11% mark from July 2000. Meanwhile, Fitch’s delinquency index stabilized for the month after improving steadily from three-year highs set in March. The index shows 60+ day delinquencies eased just one basis point to 3.22% from 3.23% last month and, as with charge-offs, worsened on year-over-year measures from 2.77%; the index reached 3.50% in March. Personal bankruptcy filings are showing signs of slowing from the alarming pace of the first five months of this year. According to VISA, year-over-year monthly comparisons, which were trending in the 25%-29% range through May, slowed to 20% and 16% for June and July. Year-to-date filings are now 23% ahead of last year’s pace. But for three-month excess spread measures, Fitch’s other credit card performance indexes posted negative results. The portfolio yield index declined sharply, partly due to the short collection period, to 18.26% from 19.41% in the prior month and 19.05% a year earlier. Monthly payment rates fell less dramatically to 15.91% from 16.17% and 16.46% in month- and year- earlier periods, respectively. Excess spread measures, benefiting from the low-cost funding environment, declined to 5.62% from 5.93% but bettered year-earlier level of 5.22%.