Most of the major credit card trusts showed generally positive performance over the July
collection period, according to a report from Barclays Capital.
Aggregate charge-offs dropped and yields rose, resulting in improved 1m and 3m excess spread, analysts said. Meanwhile, they added that the payment rates were higher. It was also notable that delinquencies continued to improve for the third consecutive month, according to Barclays.
The previous month, Barclays analysts said that a more "persuasive argument" for improving fundamental credit card collateral performance could be made if July’s delinquencies showed continued drops.
They said that they were encouraged by the consistent improvement in 30+ delinquencies,
and the turn in aggregate charge-offs.
Nonetheless, analysts are maintaining peak charge-off forecast of 11% to 11.5% as the market approaches the seasonally weak back-to-school period.
In the aggregate, collateral metrics for the major bank credit card trusts appear to have
stabilized, and even improved, over the past couple of months.
Charge-offs dropped 28 basis points, to 9.99%, following a 22 basis point rise in June. Delinquencies declined for the third month in a row, falling nine basis points, to 5.56%, in July. This was after dropping 12 basis points in June —129 basis points — after rising just four basis points in June as discount option receivables and issuer repricing of portfolios continued to have a salutary effect.
Higher aggregate yields, along with lower charge-offs, resulted in greater 1m excess
spread — 196 basis points, to 6.55%.
The 3m excess spread improved as well, increasing 80 basis points, analysts stated. Payment rates rose to 18.11%.
At the trust level, all six of the major bank card issuers — AMXCA, BACCT, COMET, CHAIT,
CCCIT, and DCENT — reported lower m/m charge-offs, Barclays analysts noted. AMXCA posted the biggest dip in charge-offs (133 basis points), followed by CCCIT (negative 48 basis points), and DCENT (negative 32 basis points).
Notably, BACCT showed a two basis point dip after three consecutive months of triple digit
increases. WMMNT charge-offs are still below 50 basis point as a result of Chase Bank’s decision
several months ago to replace the Washington Mutual collateral in the trust with Chase-originated collateral.
Delinquencies improved for AMXCA, BACCT, and CHAIT and were comparitively steady for CCCIT
and DCENT, although they weakened slightly for COMET. Meanwhile, WMMNT reported a rise in delinquencies of 44 basis points from 0.4% the previous month, analysts noted.
Delinquencies have been improving over the past couple of months, due mostly to seasonal factors. But, June is the month in which delinquency improvement historically tends to level off before rising again into the late summer/early fall, so the continued improvement in some trusts is intriguing, according to analysts.
They attribute part of it to continued seasonal effects, but also believe there are at least some signs that fundamentals may be improving.
