NEW YORK--(BUSINESS WIRE)--Last quarter's GDP contraction did little to stem the strong performance of U.S. credit card ABS, according to the latest monthly index results from Fitch Ratings.
Despite a few seasonal bumps over the April collection period, most U.S. credit card ABS metrics remain at or near record levels. Delinquencies plunged to new lows while excess spread reached record highs. All signs indicate that the health of U.S. consumers is improving, despite the contraction in GDP during the first quarter.
Last week's announcement regarding first quarter-2014 (1Q'14) GDP indicated that the U.S. economy contracted. According to the Bureau of Economic Analysis, GDP decreased at an annual rate of 1% in the first three months of the year. However there were other indicators showing the U.S. economy might bounce back in the second quarter.
According to the Conference Board, the Consumer Confidence Index increased moderately for the month of May to 83.0 from 81.7. In addition, Consumer Price Index increased 0.3 percent in April on a seasonally adjusted basis according to the U.S. Department of Labor, contributing to solid credit ABS performance. However, relatively flat sales could be mildly negative. According to the Commerce Department, retail sales rose just 0.1% in April, after notching a 1.5% gain in March. All indications still point to U.S. credit card ABS performance staying in record territory for the near term.
After hitting a record low in April, Fitch's Prime Credit Card 60+ Day Delinquency Index decreased another two basis points (bps) to 1.15% in May. The decline marks a milestone for the index reaching the lowest level since its launch in 1991. The index has declined 22% year-over-year (YOY) and now stands 75% below its peak level reached at the end of 2009.
While the delinquency index improved, Fitch's Prime Credit Card Chargeoff Index increased seven bps to 3.11% in May. However, the index remains down nearly 21% YOY. Notably, the Fitch Prime Chargeoff Index is now 73% below its historic high of 11.52% reached in September 2009.
Consistent with seasonal trends, Fitch's Prime Credit Card Monthly Payment Rate Index declined to 26.23% in May. This index is now 12% higher YOY and well above its historical average of 17.18%. Similarly, Fitch's Prime Credit Card Gross Yield Index decreased 87 bps month-over-month (MOM) to reach 18.25% in May. Prime Gross Yield has declined every May since Fitch created its credit card ABS index back in 1991.
Fitch's Prime Credit Card Three-Month Average Excess Spread Index also set a new record during in May increasing 24 bps MOM to a new high of 13.27%.
Fitch's Prime Credit Card Index was established in 1991 and tracks over $129.7 billion of prime credit card ABS backed by approximately $243.6 billion of principal receivables. The index is primarily comprised of general purpose portfolios originated by institutions such as Bank of America, Citibank, Chase, Capital One, Discover, etc.
Fitch's retail credit card indices registered positive momentum in delinquencies and MPR in May, though gross yield and chargeoffs faired less favorably. However, Fitch's Retail Credit Card Three-month Average Excess Spread Index increased 12 bps MOM to 18.60%, an all-time high for the index since its inception in 2004.
Fitch's Retail Credit Card 60+ Day Delinquency Index decreased by two bps MOM to 2.44%in May. During the same period however, Fitch's Retail Credit Card Chargeoff Index increased by 30 bps to 6.95%, increasing 4.51% MOM. However, the Retail Chargeoff index remains 50% lower than its peak of 13.41% reached in March 2010.
Fitch's Retail Credit Card Gross Yield Index decreased by 87 bps to 27.52% from the previous month, a 3.06% decrease. However, Fitch's Retail Credit Card MPR Index increased by 57 bps MOM to 15.91%.
Fitch's Retail Credit Card Indices track more than $20 billion of retail or private label credit card ABS backed by over $31.5 billion of principal receivables. The index is primarily comprised of private label portfolios originated and serviced by Citibank (South Dakota) N.A., GE Capital Retail Bank and Comenity Bank (Formerly World Financial Network National Bank). More than 165 retailers are incorporated including Wall-Mart, Sears, Home Depot, Federated, Lowes, J.C. Penney, Limited Brands, Best Buy, Lane Bryant and Dillard's, among others.
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