Prime credit card ABS performance improved in February without near-term challenges apparent. However, retail card results came in mixed, reported the latest index results from Fitch Ratings.

Having consistent positive collateral performance trends, prime credit card ABS had strong momentum into February, with chargeoffs still decreasing and declining to levels not experienced since the end of 2007.

The rating agency’s Prime Credit Card Chargeoff Index for February took off an added 10 basis points from the previous month, dipping to 5.23%. Defaults are currently at their lowest levels in four years and are down 37% year over year. Payment rates, which broke historical records this month, and delinquencies also improved.

ABS ratings on both prime and retail credit card trusts are expected to remain stable given available credit enhancement, loss coverage multiples, and structural protections afforded investors.

According to the rating agency’s 60+ day delinquency index, late-stage delinquencies are still steady at 2.26%. 

Experiencing a straight two-year month-over-month drop, delinquencies are 27% less versus the same period last year. Similarly, early-stage delinquencies related to accounts that are over 30 days delinquent dropped four basis points over the month to 3.06%, according to the rating agency.

Monthly payment rates (MPR) improved to an all-time high, for the second straight month, which added another 42 basis points to 21.95%, Fitch said.

This level set a historic high from the start of Fitch’s prime index that dated back to 1991. The current payment rate is roughly 25% more than the historical average of 16.43%. Fitch also expects levels to stay high as card borrowers still make more on-time payments and pay off existing debt faster, Fitch said.

On the other hand, the gross yield retracted after a slight gain last month decreasing to 17.44% in February. Inspite of the continued improvements in defaults, the decline in yield over the month also drove excess spread 50 basis points lower to 10.34% on a three-month average.

Although retail credit card ABS showed improvement in chargeoffs, yield, and payment rate, excess spread and delinquency levels undeprerformed. Early-stage delinquencies trended upward by 13 basis points to 4.95% while delinquencies more than 60 days increased marginally by 12 basis points to 3.40%. Chargeoffs posted close to a 1% improvement, dropping to 7.51%.

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