Strong economic signals continued to exert their influence on credit card portfolios in June, as chargeoffs and delinquencies were largely unchanged while excess spread climbed to an all-time high, according to the latest credit card performance data from Fitch IBCA.
The rating agency said that chargeoffs in June advanced slightly to 5.95%, compared with May's figure of 5.91% and the June 1998 chargeoff rate of 6.63%.
Meanwhile, delinquencies rose one basis point to 3.03%, versus the May rate of 3.02% and the June 1998 rate of 3.23%.
Yet the big news according to Fitch IBCA is the three-month excess spread index, which passed the 6% mark in June to hit 6.04% - the highest level Fitch IBCA's excess spread index has reached.
"At 6.04%, the new threshold equates to healthy returns for issuers and comfortable early amortization cushions for credit card-backed securities investors," the rating agency said in a report written by senior director Michael Dean.
Fitch IBCA officials noted that their excess spread index has remained above 5% since November 1998, and is expected to continue its strong performance through the end of the year.
Also improving in June was Fitch IBCA's portfolio, which surged to 19.71% from May's 18.65% and June 1998's figure of 19.02%. The monthly payment rate in June rose to 16.36%, marking the 12th consecutive month that the payment rate has remained above 15%. A year ago, the payment rate was 14.88%.
The results come as more good news for the credit card industry, which is enjoying a robust business as consumers both spend and charge at unprecedented rates yet also pay off larger portions of their card balances.
Those larger payments have enabled many credit card issuers to more than offset any impact experienced from rising repayments on finance charge income, the rating agency said.
Further, evidence continues to mount in support of the view that consumers are on a strong financial footing these days, compared to years past. For example, personal bankruptcies continued their downward trend, reaching 104,100 in June, down from May's figure of 108,900 and June 1998's figure of 112,600. For the first six months of 1999, bankruptcy filings are around 7% below the comparable year-ago period, reaching 641,500 this year.
Fitch IBCA's credit card index tracks the performance of more than $270 billion in credit card receivables that back some $200 billion in asset-backed securitizations collateralized by credit card pools. - JS