NEW YORK--()--Amid another strong month of performance emerged two new milestones for U.S. credit card ABS, according to the latest index results from Fitch Ratings.
September marked the first time in nearly a year that the total amount of outstanding credit card ABS has increased. The last time this took place was December 2011. September outstandings for the Fitch Prime Credit Card Index were $110 billion, up 4% over August. However, prime credit card outstandings remain about 21% below September 2011 levels. In terms of retail credit card outstandings, the Fitch Retail Credit Card Index indicates that outstandings were 2% lower than August and off 13.76% from September of last year.
This comes as the Fitch 60-day Delinquency Index built on its record low last month, coming in at 1.69%. While only a seven basis point (bps) decline from August levels, September delinquencies represent a 26.52% decline from the same period in 2011. Additionally, delinquencies are nearly 50% lower than the historical average of 3%. The Fitch Delinquency Index measures the receivables associated with accounts which are more than 60 days delinquent and are a leading indicator of credit card trust performance.
Low delinquencies and fewer bankruptcy filings are generating lower chargeoffs. In fact, Fitch's Chargeoff Index has dropped to levels not seen in nearly five years. September chargeoffs were 4.29%, a 43bps (9.11%) decline from August 2012. Chargeoffs had increased in August as a result of a one-time policy charge in the recognition of chargeoffs at Chase Bank. September chargeoffs were 32.12% lower year-over-year (YOY) and remain substantially lower than the historical average of 5.95%. In the retail sector, chargeoff levels fell to 6.83%, the lowest level since December 2007. Fitch expects chargeoffs to remain low near-term as delinquencies and bankruptcies continue to decline.
Fitch's Monthly Payment Rate Index also reached a historic milestone in September when monthly payment rate (MPR) rose to 22.99%, a 65 bps (2.91%) increase over August. MPR remains elevated when compared to the historical average of 16.58% and September's figures represented a 5.07% increase YOY. MPR, which measures how quickly cardholders are paying down outstanding balances, is typically stronger in the second and third quarters, but tends to recede in the fourth quarter.
The Fitch Gross Yield Index are reverting to mean levels as the September observation of 18.21% is very much in-line with the historical average of 18.57%. In addition, the September MOM decline in MPR (0.16%) is the smallest observed since December of 2010. Fitch's Three-Month Excess Spread Index is again approaching its all-time high.
During September the index reached 11.17%, only 21 bps off its historical high of 11.38% experienced a year ago. The Index also remains significantly elevated above its historical average of 6.05%. While the September observation is up 2.76% over August, it remains lower (down 1.85%) when compared to September of 2011. Fitch's Three-Month Excess Spread Index has exceeded 10% for twenty-two consecutive months.
Fitch's Prime Credit Card Index was established in 1991 and currently tracks more than $110 billion of prime credit card ABS. The index is primarily composed of general purpose portfolios originated by institutions such as Bank of America, Citibank, Chase, Capital One, Discover, Etc.
During September, Fitch's Retail 60-day Delinquency Index was relatively flat over August, increasing just three bps to 2.68%. Delinquencies are also nearing the all-time low of 2.43% observed in February 2006 and remain well below the historical average of 4.06%. Lower delinquencies have translated into lower chargeoffs in the retail sector as well. Fitch's Retail Chargeoff Index for September declined by seven bps to reach 6.83%. While only a 1.01% decline over August, the September observation is 21.22% below the levels experienced in September 2011.
The Fitch Retail Monthly Payment Rate Index for September is 56 bps (3.81%) higher than August's levels, representing a nearly 5% increase from the same period in 2011. The Fitch Retail Gross Yield Index continues to indicate that gross yield is robust for the composite trusts. September gross yield was 25.99%, up 17 bps over August and in-line with the historical average of 25%. Fitch's Retail Three-Month Excess Spread Index reached a new high during September as it peaked at 14.83%. This represents a 19.21% increase over September 2011 and is up 1.44% over August 2012.
The Fitch Retail Index measures the performance of roughly $27 billion of ABS backed by receivables generated by cards for use at specific retailers. The index is primarily made up of private-label portfolios originated and serviced by Citibank (South Dakota) N.A., G.E. Money Bank, and World Financial Network National Bank. More than 165 retailers are incorporated including Wal-Mart, Sears, Home Depot, Federated, Lowes, J.C. Penney, Limited Brands, Best Buy, Lane Bryant, and Dillard's, among others.
ABS ratings on both prime and retail credit card trusts are expected to remain stable given available credit enhancement, loss coverage multiples, and structural protections afforded investors.
Additional information is available at 'www.fitchratings.com'.