The slow down in consumer spending seen recently can mean that credit card balances remain flat for the foreseeable future, according to Bank of America Merrill Lynch analysts.
However, they said that this phenomenon does not affect credit card ABS new-issue volume, which tops last year's numbers. Both U.S. and non-U.S. banks have funded through the credit card ABS market more and more, they noted.
June saw some positive data for the sector. For instance, credit card delinquencies and charge-offs were unchanged or declined for six major ssuers iduring the month, and remain below year-ago levels, noted recent emailed commentary from Standard & Poors analysts. They consider this to be a modest positive for credit card ABS.
Meanwhile, they cited other positive indicators. June delinquencies remained the same for two and dropped for four of the firms. They noted that American Express had the lowest 30+ day delinquency rate at 1.20% and Bank of America had the highest at 3.23%.
BofA Merrill ABS added in their July 16 report that the receivables balances for most credit card trusts are still contracting on a year-over-year basis. However, the pace of the decline has slowed while changes on a month-over month basis were mixed.
They explained that previous drops in balances as well as high levels of scheduled maturities have meant that there is little need for sponsors to assign additional accounts to their related trusts and, in some instances, have allowed them to reassign accounts and take out receivables.
Analysts are projecting gross supply of $30 billion and negative net supply of $53 billion for all of 2012.
Almost all trusts continue to experience lower charge-off rates both in terms of year-over-year and a month-over-month data, analysts said. Additionally, all trusts continue to have lower delinquency rates year-over-year.
"Relatively conservative lenders and borrowers and, at the trust level, account seasoning, should continue to benefit credit performance," analysts stated.
