Fitch: U.S. Prime Credit Card Chargeoffs Now 75% Off Recession Peak

U.S. prime credit card ABS chargeoffs and 60+ day delinquencies again tested new lows in June, according to the latest index results from Fitch Ratings.

With credit card ABS performance so closely tied to employment, positive movement is likely to continue given the most recent employment data. Total nonfarm payroll growth of 209,000 in July represents the sixth consecutive monthly increase in excess of 200,000. The unemployment rate increased to 6.2%. Also, the four-week moving average for initial jobless claims was 297,250, the lowest level seen since April 2006.

Fitch’s Prime Credit Card Charge-off Index declined nearly 7% month-over-month (MOM) to a record low of 2.86%. Now 21% lower year-over-year (YOY), the index has declined 75% from its recession high of 11.52% observed in September 2009. 60+ Day Delinquencies also reached a new low, falling a further 3.67% MOM to 1.05%. Fitch’s delinquency index has now moved lower for five consecutive months and is down almost 22% YOY. Monthly Payment Rate also advanced towards its prior high, rising nine basis points (bps) MOM to 27.08. The rate is now just 27 bps off the indexes 23-year high of 27.25% reached in February 2014.

Fitch’s Prime Credit Card Gross Yield Index rose 2.29% MOM to 18.76%, up nearly 3% YOY. Higher gross yields and lower chargeoffs have supported stability in three-month average excess spread. Fitch’s Prime Credit Card Three-month Average Excess Spread Index registered a small decline of 7 bps MOM to end at 13.20%.

Fitch’s Prime Credit Card Index was established in 1991 and tracks over $128 billion of prime credit card ABS backed by approximately $246 billion of principal receivables. The index is primarily comprised of general-purpose portfolios originated by institutions such as Bank of America, Citibank, Chase, Capital One, Discover, etc.

Fitch’s Retail Credit Card Chargeoff Index also improved, falling nearly 6% MOM to 5.96%, a nine-month low for the index. The Retail Chargeoff Index is now 5.85% lower on the year and 56% off its all-time high of 13.41% reached in March 2010. 60+ Day Retail Delinquencies rose slightly from its all-time low of 2.26% to settle at 2.28% for the month. Fitch’s Retail Credit Card Gross Yield Index also advanced, climbing 3.43% MOM to 27.42%, while Fitch’s Retail Credit Card Monthly Payment Rate Index declined 1.15% to 15.49%, a three-month low.

Fitch’s Retail Credit Card Indices track more than $21 billion of retail or private label credit card ABS backed by over $31.5 billion of principal receivables. The index is primarily comprised of private label portfolios originated and serviced by Citibank (South Dakota) N.A, Synchrony Financial (Formerly GE Capital retail Bank), and Comenity Bank (Formerly World Financial Network National Bank). More than 165 retailers are incorporated including Wall-Mart, Sears, Home Depot, Federated, Lowes, J.C. Penney, Limited Brands, Best Buy, Lane Bryant and Dillard’s, among others.