Don’t miss another episode of Truth In Data! Click on the red bell in the lower left corner of your screen to receive notifications as soon as the episode publishes.
Data for this episode of Truth In Data provided by Mercator Advisory Group’s report – Asset-Backed Securities: A Primer for Credit Card Managers
- Balance Ranges: Active vs. Inactive accounts and their balance ranges dictate portfolio valuation & risk
- Credit Lines: Open credit lines & line utilization vs. balance dictates growth potential & decisioning
- Account’s Length of Time on Books: So-called “account seasoning” and historical performance
- Delinquency: Receivables aging & credit quality informs operational risk assessment
- Portfolio Composition: Card programs included in the ABS trust and their portfolio components
- Geographic Distribution: State-level view of the trust informs regional risk
- FICO Score: Portfolio quality using an industry standard
About this report
Mercator Advisory Group has released its latest research report. Titled Asset-Backed Securities: A Primer for Credit Card Managers, this report is the first analysis of the asset-backed securities (ABS) market since the recession that focuses on the credit card industry.
Readers will learn about the logical and legal flows of credit card asset-backed securities (ABS), an important financing tool used by many top issuers. Asset-backed securitization enables lenders to originate credit card accounts, season their portfolios, and then sell the receivables to bank-owned trusts that enable investors to buy future revenue streams. Credit card issuers can generate servicing fees and then use the funds to reinvest in new accounts. One top-tier bank has 50 percent of its portfolio securitized, which is a key component of its growth strategy.
“The report presents a case study of the asset-backed securitization of a credit card portfolio of a major global bank to illustrate the level of analytics covered in an ABS prospectus. One important facet that is apparent is the importance of the FICO® Score and the way it is used throughout the credit cycle from origination to credit cycle management and ultimately through securitization,” notes the author of the report, Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group. He adds: “Dodd-Frank brought discipline to the ABS process, and issuers have a requirement to effectively manage their portfolios, particularly as they place blocks of accounts into the capital markets.”
