The market for U.S. credit card ABS hit two milestones during September, both encouraging signs for the asset class.
Fitch Ratings said this morning that last month marked the first time since December 2011 that the total volume of outstanding credit card ABS has increased.
The figure has reached $110 billion, an increase of 4% from August. But it still remains more than20% below the level of September 2011.
Credit ABS issuance has been rising with programmatic issuers and some banks like JPMorgan Chase and Citibank making a comeback. This has more than offset the pace of run-off of outstanding deals.
In addition to the volume figure, Fitch’s 60-day delinquency index gapped down to1.69%, a drop of seven basis points from August.
The rate of delinquencies is getting close to half the historical average of 3%. The Fitch Delinquency Index measures the receivables associated with accounts that are over 60 days delinquent. This number is a leading indicator of credit card trust performance.
Fitch said that low delinquencies and fewer bankruptcy filings are generating lower charge-offs. As a result, the agency’s chargeoff index has fallen to levels not seen in nearly five years.
September charge offs were four point twenty nine percent, a drop of 43 basis points drop from August 2012. Charge offs had increased in August because of a one-time policy charge in the recognition of chargeoffs at Chase Bank.
September's figure remain much lower than the historical average of five point ninety five percent.
In the retail sector, chargeoff levels fell to 6.83%, the lowest level since December 2007. Fitch expects chargeoffs to stay low in the near-term as delinquencies and bankruptcies are still on the decline.
Fitch’s Prime Credit Card Index tracks over a hundred ten billion dollars worth of prime credit card ABS. The index mostly comprises general purpose portfolios originated by institutions such as Bank of America, Citibank, Chase, Capital One, and Discover Financial Services.