Fitch Says U.S. Prime Card Chargeoffs Hit Lowest Level in 4 Years

by Mercator Advisory Group 0

Fitch’s monthly readings on credit card asset backed security performance continue to improve. Indeed, chargeoffs on prime credit cards reached a 52 month low, reaching levels last seen in 2007. From a Fitch press release:

U.S. prime credit card ABS chargeoffs declined to their lowest levels since 2008. Most major collateral metrics posted month-over-month improvements in March. The lone exception was the monthly payment rate. Credit card defaults and late payments fell once again, while yield and excess spread levels rose for the month.

Registering a six-year low, late stage delinquencies shed another three basis points (bps) to settle at 2.23% for the month of March. Year over year, current 60+ day delinquencies are 28% lower. This ongoing rapid improvement has pushed Fitch’s delinquency index 51% below peak levels reached at the end of 2009. Likewise, early stage delinquent balances, associated with borrowers who have missed at least one payment, also dropped four bps this month to 3.02%.

These positive results are driven both by an improving economy as well as the stringent account underwriting adopted during the recession and largely continued today.

On the retail card (private label credit card) front, the news is also positive, although retail cards retain their historical performance differences versus general purpose cards.

Fitch’s Retail Credit Card ABS Index was mostly positive with the exception of chargeoffs. Along with relatively steady delinquencies, excess spread and monthly payment rate metrics posted month over month improvements.

After a near 1% drop down to 7.51% in February, retail losses edged up 61 bps to 8.12%. Despite the drop in performance, defaults remain 26% lower compared to the same period last year.

Click here to read the Fitch press release.