Fitch Affirms Ratings on CARDS II Trust

NEW YORK--()--Fitch Ratings has affirmed the class 2013-1 notes of CARDS II Trust (the Trust) rated by Fitch as follows:

--2013-1A at 'AAAsf'; Outlook Stable;

--2013-1B at 'BBBsf'; Outlook Stable.

KEY RATING DRIVERS

The affirmations are based on continued stable trust performance. The current 12-month average gross yield is 22.22% as of the October 2014 reporting period, slightly lower than the 12-month average of 22.67% as of the October 2013 reporting period.

Monthly payment rate (MPR), a measure of how quickly consumers pay off their credit card debts, has remained relatively stable over the past year but has trended down from prior years. The 12-month average is 36.48% as of the October 2014 reporting period, lower than the 12-month average of 39.35% the previous year.

Net charge-offs have again experienced a decline over the past year. As of the October 2014 reporting period, the 12-month average is 3.48%, compared to the 12-month average of 3.62% as of the October 2013 reporting period. Twelve-month averages for 60+ day delinquencies also dipped to 1.22% from 1.27% over the same period.

The year-over-year decline in both 12-month average gross yield and MPR is largely the result of the December 2013 removal from the CARDS II Trust custodial pool of approximately C$3.2 billion of Aerogold Visa credit card receivables which were subsequently sold to Toronto Dominion Bank. The receivables associated with reward credit cards such as the Aerogold Visa typically have higher payment rates and lower loss rates than non-reward products.

Fitch runs cash flow breakeven analysis by applying stress scenarios to three-, six-, and 12-month performance averages to evaluate the breakeven loss multiples at different rating levels given the available credit enhancement. The performance variables that Fitch stresses are the gross yield, MPR, gross charge-off, and purchase rates. As part of its ongoing surveillance efforts, Fitch will continue to monitor the performance of these trusts. For further information, please review the U.S. Credit Card ABS Issuance updates published on a monthly basis, available at www.fitchratings.com.

The affirmations are based on the performance of the trusts in line with expectations. The Stable Outlook indicates that Fitch expects the ratings will remain stable for the next one to two years.

RATING SENSITIVITIES

Fitch models three different scenarios when evaluating the rating sensitivity compared to expected performance for credit card asset-backed securities transactions: 1) increased defaults; 2) a reduction in purchase rate, and 3) a combination stress of higher defaults and lower MPR.

Rating sensitivity analysis to increasing defaults alone as well as reducing purchase rate alone both have the least impact on rating migration. The most severe scenarios of increasing defaults by 75% or decreasing purchase rate by 100% both lead to a possible downgrade on the class A notes. The harshest scenario assumes both stresses to defaults and MPR to occur simultaneously. The ratings on the class A notes would be downgraded under the moderate stress of a 50% increase in defaults and 25% reduction in MPR. Ratings on class A and class B notes would be further downgraded under the severe stress of a 75% increase in defaults and a 35% reduction in MPR. To date, the transactions have exhibited strong performance with all performance metrics within Fitch's initial expectations. For further discussion of sensitivity analysis, please see the new issue report related to one of the transactions listed above.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria'(May 2014);

--'Global Credit Card ABS Rating Criteria' (August 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria - Effective from 20 May 2014 to 4 August 2014
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

Global Credit Card ABS Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748920

Additional Disclosure

Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=944057

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Herman Poon, +1-212-908-0847
Director
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Jenny Ovalle, +1-212-908-0849
Associate Director
or
Committee Chairperson
Steven Stubbs, +1-212-908-0676
Senior Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Herman Poon, +1-212-908-0847
Director
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Jenny Ovalle, +1-212-908-0849
Associate Director
or
Committee Chairperson
Steven Stubbs, +1-212-908-0676
Senior Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com