Chargeoffs, delinquencies for credit card ABS fall to lows

credit-card-finance2Recent data from Fitch Ratings revealed U.S. credit card asset-backed securities saw both chargeoffs and delinquencies fall to new lows in the beginning of the year.

Payment rates improved for ABS, which has consistently posted performance improvements, while yield and excess spread fell off. Credit card chargeoffs are now at a six-year low, falling from 4.18 percent to 3.88 percent. Last year, chargeoffs improved at a rate 26 percent lower.

Late payments also declined to 1.61 percent, the lowest level since Fitch launched its Prime Credit Card Chargeoff Index in 1991, which has contributed to a 65 percent decline below 2009 peak levels in late stage delinquencies.

During the January collection period, performance of gross yield decreased by 1.16 percent to reach 17.35 percent, and three-month average excess fell 24 basis points after increasing for nine consecutive months prior. Excess spread is at 11.40 percent from an all-time high of 11.65 percent, but despite the January decline, excess spread levels are nearly double their long-term average of six percent.

Fitch Ratings’ Prime Credit Card Index tracks more than $110 billion of prime credit card ABS that is backed by nearly $260 billion in principal receivables. The index is primarily comprised by portfolios originated by Bank of America, Citibank, JPMorgan Chase, Capital One, Discover and others.

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