Credit card securitizations almost exclusively consist of receivables of well-seasoned, high-quality cardholder accounts that have performed well despite persistently high unemployment, according to a Moody's Investors Service report published today.
Securitized credit card charge-offs in the US decreased to 4.11% in September from 4.19% in August, according to Moody's Investors Service's credit card indices.
Moody's expects the charge-off rate index to decline on the back of the historically low delinquency rates of this past summer.
"This month's improvement continues the steady declines since charge-offs peaked in the first quarter of 2010," said Jeffrey Hibbs, a Moody's assistant vice president and analyst. "In September, the strong credit trends that have been driving the charge-off rate steadily lower for the past several years remain firmly in place."
Delinquencies increased to 2.39% in September, seven basis points above the all-time low set last month. Moody's explained in the report that seasonally elevated delinquencies while typical for this time of the year, break away from the consistent declining trend delinquencies have seen since Oct. 2009. According to Moody's, September's reading is just the second time in that timeframe that delinquencies have increased.
The principal payment rate index also receded from its all-time high set last month, but the overall third quarter mark of 22.07% established a new high, a continued indicator of strong credit trends.
"Historically low delinquencies and high payment rates underscore the exceptionally strong credit quality of securitized credit card receivables," said Hibbs. "Issuers charged off the accounts of weaker cardholders at record levels during the recession, and originators have added few receivables from new accounts to securitizations."