Fitch: U.S. Credit Card Performance Measures Mixed as Chargeoffs Drop

NEW YORK–U.S. credit card performance measures exhibited mixed results last month with chargeoffs declining for the second time in three months while delinquencies resumed their upward trends according to the latest Credit Card Index results from Fitch Ratings. The results come as consumers continue suffer from high unemployment rates and a lack of credit availability.

"U.S. consumer credit quality measures remain pressured and chargeoffs will stay high until we see some improvement in employment conditions and in delinquency trends," said Managing Director Michael Dean.

Despite the ongoing unfavorable trends, Fitch continues to expect current ratings of senior credit card ABS tranches to remain stable given available credit enhancement and structural protections afforded investors. The outlook for subordinate tranches remains negative. Fitch expects the U.S. unemployment to peak at 10.3% in second-quarter 2010 and remain above 10% throughout 2010.

During the month, Fitch’s Credit Card Chargeoff Index declined 77 basis points (bps) to 10.75%, marking just the third month-over-month improvement. Despite pulling back from last month’s record high, the chargeoff index remains 71% above year-earlier levels.

Measured by Fitch’s 60+ day delinquency index, late payments rose 16 bps to 4.22% after a 20 bp dip last month. Late stage delinquencies are running 33% higher on a year-over-year comparison. Early stage late payments increased for the month as well, with 30+ day delinquencies rising 13 bps.

"While somewhat seasonal, the rise in delinquencies provides further evidence that chargeoffs will remain elevated in the coming months," said Senior Director Cynthia Ullrich.

Monthly payment rate (MPR) remains stronger than earlier this year at 17.98%. MPR is well above the historical average of 15.98% and remains above the 2009 average of 17.37%. MPR has remained consistent year-over-year as current MPR is 9 bps higher than it was during October 2008.

During October, gross yield decreased 27 bps to 19.39%. However, gross yield continues to be strong relative to historical data as a result of discount options and repricing initiatives in various trusts. Compared to last year, gross yield is up 254 bps or 12%.

Three-month average excess spread increases 50 bps this month to 5.75%., its highest level since the February 2009 period. This increase is driven by the one month excess spread increasing to 5.99% this month. The increase in three-month average excess spread has enabled trusts that were trapping excess spread to release all or part of the trapped amount.

Additional information is available at www.fitchratings.com.