Fitch: U.S. Credit Card ABS Ends 2011 on a Strong Note

NEW YORK--(BUSINESS WIRE)-- U.S. prime credit card ABS turned in another solid month of performance to close out 2011, according to the latest index results from Fitch Ratings.

Delinquencies and chargeoffs remained low for December while monthly payment rates held steady. However, gross yield slipped a bit which in turn caused excess spread to compress.

Compared to 18 months ago when performance only just begun to ease off all time record highs, current losses have been reduced by half and now stand at 5.64%. Losses have been below 6% for the last three months. 60+ day delinquency trends have hovered around 2.30% for the last five months. Chargeoff performance finished the year approximately 37% lower from year ago levels.

The Fitch Chargeoff Index has averaged 6% over the last 20 years.

Gross yield declined 34 basis points (bps) since last month to 18.83%. Over the past year, however, gross yield has gradually declined by 300bps. Fitch believes this is due to the increased use of promotional pricing as issuers seek to expand borrowers. Monthly payment rates remain solid at 20.40%. Over the past four years performance of MPR hovered between 16 and 22%, with a 2011 average of 21%. The Fitch Prime index has measured the performance of collateral in ABS trusts which Fitch rates since 1991.

Fitch's Prime Credit Card index was established in 1991 and tracks more than $134 billion of prime credit card ABS backed by approximately $250 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.

Retail credit card ABS also ended the year on a strong note with across-the-board improvements from year ago levels.

Late stage delinquencies for December were 100 bps lower than levels exhibited in the same period in 2010, closing out the year at 3.50%. Retail chargeoffs held steady in December from the prior month at 8.36%, while remaining 30% lower year over year. Gross yield was relatively stable throughout 2011 averaging 25%-26%, while MPR slightly improved when compared to performance in 2010.

The biggest contributor to overall positive performance of the index came from excess spread. It reigned in double digit figures through most of the year, registering levels last seen in 2007. The three month excess spread averaged close to 11.50% for 2011 and has slowly improved as overall losses declined during the same period.

Fitch's Retail Credit Card index tracks more than $33 billion of retail or private label credit card ABS backed by approximately $49 billion of principal receivables. The index is primarily comprised of private label portfolios originated and serviced by Citibank (South Dakota) N.A., GE Money Bank and World Financial Network National Bank. More than 165 retailers are incorporated including Wal-Mart, Sears, Home Depot, Federated, Loews, J.C. Penney, Limited Brands, Best Buy, Lane Bryant and Dillard's, among others.

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