Credit card indicators are looking good with August numbers showing charge-offs decreasing for most asset-backed securities trusts.
In a report released today, Citigroup Global Markets analysts said that in the Citi Credit Card ABS Index, charge-offs were at 3.59% as of August 2012. This number decreased by 29 basis points month-over-month.
Additionally, analysts said that most trusts in the Citi Credit Card Index saw charge-offs dipping with JPMorgan Chase’s Chase Issuance Trust or CHAIT charge-offs improving by 97 basis points.
Meanwhile, GE Capital’s GE Capital Credit Card Master Note Trust (GEMNT) and American Express’ American Express Credit Account Master Trust or AMXCA went against the trend of decreasing charge-offs with their numbers rising nine basis points for GE and 16 basis points for Amex, Citi analysts said.
Moody’s Investors Service also reported yesterday that in August, securitized credit card charge-offs based on the Moody's Credit Card Index charge-off rate dropped to 4.19% from 4.56% in July.
The rating agency said that the month's improvement reiterates the theme of steady drops that have been ongoing since charge-offs peaked in the 1Q10.
The strong credit trends that have been driving the charge-off rate steadily lower over the past several years are still in place. Moody’s expects that the charge-off rate index will continue to drop slightly over the upcoming months.
The rating agency explained that charge-off rate measures credit card account balances that have been written off as uncollectible as an annualized percentage of the total outstanding principal balance.
Falling Delinquencies
Citi’s delinquency index decreased by three basis points to 2.44% in August month-over-month.
The bank reported that delinquencies have fallen in 28 out of the last 32 months. Most trusts in the Citi credit card index saw slight delinquency drops of up to six basis points.
Once again GE’s GEMNT and Capital One’s Capital One Multi-Asset Execution Trust or COMET went against the falling trend, as both increased their delinquencies by six basis points.
Moody’s reported that the delinquency rate index fell to 2.32% in August from 2.36% in July.
The early-stage component of delinquencies trended upwards to 0.67% from 0.66% last month. This August increase in early-stage delinquencies is not out of the ordinary since July usually is the seasonal low-point for early-stage delinquencies.
The rating agency said that the delinquency rate measures the proportion of account balances on which a monthly payment is over 30 days late as a percentage of the total outstanding principal balance. Meanwhile, the early-stage delinquency rate measures the proportion of account balances for which a monthly payment is 30-59 days late as a percentage of the total outstanding principal balance.
Other Indicators
Other measures are proving that the asset class appears healthy. For instance, the index portfolio yield gained eight basis points in August to 18.53% from July, according to Citi.
GEMNT’s yield was also higher by 2.24% month-over-month to 25.95% in August.
However, Citi analysts said that the month-to-month data changes might have some noise so the three-month average might be a more reliable measure. The portfolio yield, which increased by 57 basis points in August, is the more significant measure, they said.
AMXCA and Bank of America’s Bank of America Credit Card Trust or BACCT also slightly increased their yield last month by 20 basis points to 23 basis points. Meanwhile, Discover’s Discover Card Execution Note Trust (DCENT) dropped its portfolio yield in August by 36 basis points to 18.54%.
The Citi index’s payment rate also rose 28 basis points month-over-month to 22.34% in August. The bank reported that most trusts’ payment rates increased from 53 basis points to 71 basis points.
However, AMXCA’s payment rate decreased 64 basis points in August to 30.37% while DCENT's payment rate also dropped 16 basis points at 23.15% in August.
