Recent data released by Fitch Ratings showed improvements in consumer credit as credit card asset-backed securities improved last month.
Chargeoffs, delinquencies, yield, monthly payment rate and excess spread improved, and some of the variables broke record levels.
Late stage delinquencies, which measure the percentage of receivables associated with accounts delinquent 60 days or more, fell for a fifth consecutive month to 1.3 percent. Chargeoffs fell to 3.37 percent, and loss levels fell 29 percent year-over-year—a level not seen in more than seven years.
Excess spread measures have gradually increased as a result of improved loss performance and steady yields. Excess spread increased to an all-time high of 12.32 percent in August.
MPR outperformed all variables during the month of August, rising nearly two percent from July to reach 26.05 percent. Current MPR levels remain well above Fitch’s long-term index average of 16.86 percent.
Retail chargeoffs fell for the third consecutive month, dropping to 6.08 percent. Losses have fallen 11.88 percent since the same period last year. Late state delinquencies, however, have remained relatively unchanged and averaged 2.3 percent for the past three months. Late payments have fallen 12.45 percent over the past year.
ABS ratings on both prime and retail credit card trusts are expected to remain stable in coming months, given available loss coverage multiples, credit enhancement and structural protections provided to investors.