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03/02/2011 -
According to Fitch Ratings most recent Credit Card Asset-Backed Security Index results, the U.S. credit card market's ABS performance has improved.In December, all variables that Fitch Ratings tracks improved, including chargeoffs, delinquencies, yield, monthly payment rate and excess spread. The results indicate continued strong performance as credit card defaults fell to a 23-month low and delinquencies dropped to a 27-month low. This is good news for the payment processing sector, as more consumers are paying off their credit debt.
Chargeoffs have decreased 18 percent in year-over-year comparisons. Managing director Michael Dean predicts that chargeoffs will continues to decline throughout the first quarter, but they still remain well above historical averages.
"Chargeoffs are still above historical averages and will likely remain at elevated levels until we see more meaningful improvement on the labor front," said Dean.
Nonetheless, there are several positive market drivers that are expected to keep ABS ratings stable, including available credit enhancement, loss coverage multiples and investors structural protections. Bank of America, Capital One, Chase, Citibank and Discover all reported notable monthly improvements in default rates.
Citigroup analysts predict that credit card ABS will improve in 2012 thanks to economic growth and commercial and consumer loan improvements, the Wall Street Journal reports.
