Fitch: Retail Card Performance Worth Celebrating Ahead of Holiday Season –Prime Chargeoffs Plunge

by Mercator Advisory Group 0

Just as broader credit card performance measures are improving, retail cards (i.e. private label and retailer issued store credit cards) defaults are approaching four year lows. The Fitch index tracks the performance of ABS pools from major issuers of private label cards from 165 different retailers.

Continuing a positive five month trend, Fitch’s Retail Credit Card Chargeoff Index broke below the 8% mark during the October distribution period. Shaving off another 89 basis points (bps) in performance through September 30th, retail defaults stood at 7.78%, levels last observed in February 2008 and remaining 33% lower year over year. However, Fitch expects losses to trend up as delinquency levels have begun to tick up as expected due to seasonality.

Late stage delinquencies snapped a seven month improvement streak last month and rose another four bps to 3.36% in October. Throughout 2011, late payments have remained below the 4.17% average of the retail index since inception.

Meanwhile, three month average excess spread on retail portfolios continues to make headlines as it improves yet again for the fifth straight monthly period in October. Excess spread is nearing record highs after rising 97 bps to 13.41%

Retailer cards have experienced a decline in overall outstandings and accounts comparable to the general purpose card market. Retailers and their issuing partners are again showing interest in the segment and are adding rejuvenated rewards programs (e.g. Target), and some issuers are showing new commitment and interest in the segment (e.g. Capital One).

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