Standard and Poor's expects bank card charge-offs to stay at low levels in 2012 as long as trusts maintain current credit compositions. The rating agency's analysts said that this is positive for credit card ABS collateral.
Bankcard charge-offs dropped to 4.4% from a peak of 10.5% in February 2010, according to S&P’s credit card quality index or CCQI.
However, the rating agency analysts also stated that revolving consumer debt is slowly rising and some bankcard issuers have begun to ease underwriting standards.
They added that new account additions to existing trusts with less predictable payment behavior can potentially increase charge-offs, analysts stated.
In a Barclays Capital report released this week, analysts stated that the January distribution date data, which reflects activity in the December collection period, showed that aggregate bank card collateral performance generally improved over the month. Charge-offs and delinquencies declined while the excess spread and the payment rate trended upwards.
Meanwhile, bank card yield was essentially flat, analysts stated. Particularly, aggregate bank card charge-offs dipped 32 basis points to 4.65%, and delinquencies dropped 12 basis points to 2.94% from 3.06%, Barclays analysts reported.
The aggregate yield dropped four basis points this month, to 19.35%. The decrease in yield was more than offset by improved charge-offs, resulting in a 29 basis point rise in aggregate one-month excess spread, to 11.83%.
Additionally, Barclays analysts reported that three-month excess spread rose three basis points, to 11.76%, and the aggregate monthly payment rate increased 98bp, to 21.72%.
By contrast, aggregate retail credit card collateral performance was generally weaker for the January distribution date, according to Barclays. The charge-offs were higher, and yield and excess spread were lower. However, delinquencies were lower, and the payment rate increased.
The aggregate retail credit card charge-offs rose 32 basis points month over month to 6.75%, after dipping 20 basis points the previous month to 6.43%.
Meanwhile, Barclays analysts said that delinquencies of 30 or more days dropped 36 basis points to 3.66%, after staying essentially unchanged in the previous month.
The aggregate yield fell by 98 basis points to 24.5%. This, along with the increase in charge-offs, resulted in a 137 basis point decrease in one-month excess spread to 13.15%. Likewise, three-month average excess declined 52 basis points, to 13.92%. The monthly payment rate on retail cards increased for the second straight month, rising 22 basis points to 18.57%.
S&P also said in a recent report that credit card ABS issuance surpassed expectations in 4Q11, ending the year at $16.2 billion compared to forecasts of about $10 billion to $15 billion. The rating agency expects this trend to conintue in 2012.
"We believe issuance will exceed $20 billion in 2012 as a result of the amount of receivables that are expected to enter the market due to lenders' less-strict underwriting standards and the slowdown in consumer deleveraging, as well as the $64 billion of credit card ABS that's slated to mature this year," said Standard & Poor's credit analyst Ildiko Szilank.
Credit card receivable performance also improved in 4Q11 with loss rates dipping to historically low levels. Loss rates for bank and private-label credit cards dropped to 4.4% and 6.8% in December 2011, a decrease of 58% and 46% from their February 2010 peaks of 10.5% and 12.6%, respectively.
To compare, the S&P/Experian Credit Default Indices showed that an average 4.6% bankcard default rate for December 2011, a dip of 32% from 6.7% in December 2010.
As of Dec. 31, 2011, S&P analysts said that the U.S. and Canada Credit Card Quality Index tracked roughly $347.3 billion of receivables, which is rougly 43% of the $798 billion total U.S. revolving consumer credit outstanding as of November 2011, citing Federal Reserve Board.
Despite S&P's expected issuance increase, however, analysts think that credit card ABS outstanding will potentially shrink by an added $30 billion to $40 billion in 2012. This is from the $164.1 billion that was outstanding in 2011.
These projections are based on the belief that new issuance volume will be lower versus the $64 billion worth of publicly offered credit card ABS that is scheduled to mature this year, S&P said.
