Panelists on the credit card panel at ASF 2012 said that on a relative value basis the asset class has performed well, although it has seen some recent technical dislocation.
The American Securitization Forum conference is going on this week in Las Vegas.
Steven Moffitt, vice president at Goldman Sachs, said that the good performance in the asset class can be attributed to issuers managing risk well and adding receivables and credit appropriately to their respective vehicles. Some of these companies have also enhanced their vehicles to maintain ratings.
The speakers at the panel added that another advantage of the sector is that issuers have skin in the game, and not merely for regulatory reasons.
With deal volume in the sector remaining modest, Kevin Sweeney, a director at Discover Financial Services, said that they are seeing improvements in spreads in the space.
Like other ABS sectors, credit cards have not seen a deluge of issuance. For this asset class, one issue has been since these are on-balance-sheet vehicles, banks have other attractive investment vehicles they can use to raise funds.
Panelists explained that since FAS 140 no longer applies to these receivables, there has not been capital gain-on-sale related to issuance. Issuers have had to make comparisons between issuing a Class-A ABS and financing on a very liquid balance sheet.
Discover, for instance, has seen the share of ABS of its total funding decline to around 28% currently from 50% in 2007, although it still views securitization as a viable diversity tool.
Issuers have also backed away from issuing subordinated debt, and have focused instead on the top part of the capital structure.
However, Sweeney said that this can only be resolved after the market sees more regular higher-rated issuance. He added that Discover is looking actively at issuing in the subordinate space, but this would largely depend on spreads.