According to the information from Fitch ratings or credit card index results, U.S. credit cards have been performing at a stable level as seen from improvements in delinquencies.
The Managing Director Michael Dean said that charge offs could be benefited as delinquencies are being affected by seasonal changes. He also said that for any meaningful improvement and changes to occur there must be positive trends in the employment scenario as well.
The Fitch's Delinquency index for 60+ days dropped by another 17 basis points and set a low mark in 17 months. 30+ delinquencies have also been improving as they decreased for the third month to 5.27% by 26 bps. While there is an elevation in the delinquencies of 60+ days, the trend is still below the average which has been 4.33% in 2009. As a measure of future losses, measurable decline in delinquencies indicate there could be a lower charge off in the months to come.
Fitch's credit card charge off index for prime credit cards show that charge offs were just about 7 % above the levels a year ago. With a 61bp increase within credit card trust of BA alone, other issuers still show lower rates consistently.
Seeing the resilience of senior credit card ABS despite delinquencies and higher charge offs, it should stay stable said Senior Director Cynthia Ulrich. The outlook remains negative though for smaller tranches.
Gross yields have also shown variations. There has been an upward trajectory in the gross yield after an initial drop. May showed the second highest level in gross yield which is about 22.20%. Initiatives to reprice and to provide discounts from multiple issuers is expected to give a boost to the performance of the yield, which has been rising by 26% when compared to the same time frame last year. However Fitch expects that there may be a 10% decline in the gross yield from changes in legislation and regulations.
The retail credit card ABS has shown an improvement in the charge off trends and delinquency trends. While late delinquency has been falling for the fourth month in a row charges off rates have been staying more or less consistent over time.
The retail index of Fitch consists mainly of labels privately operated and owned by Citibank, GE money bank, HSBC Bank Nevada, to name a few. There are also 165 retailers as part of it such as Walmart, West buy, J.C. Penney, Sears and Home depot to name a few.