Credit performance of private label retailer cards continued to improve in July, according to Fitch Ratings, which tracks ABS pools of major retailer card issuers. While retailer programs tend toward lower credit performance in all economic environments, these programs are following the track of strong improvement seen across revolving credit programs.
Approaching a four-year low, late stage delinquent balances, associated with borrowers who have missed at least two payments, improved 14 bps down to 3.28%. This marks the fifth straight monthly improvement for 60+ day delinquencies. ‘Borrowers are showing more signs of getting back on track with their retail credit card payments and are likely to continue doing so for the foreseeable future,’ said Director Herman Poon. Current delinquency levels are approximately 28% lower than the historical average since inception of the index of 4.20%. Early stage delinquencies also declined for the third consecutive month, dropping another 14 bps below the 5% mark to 4.92%.
Fitch’s Retail Credit Card Chargeoff Index in July trended lower for the second consecutive month below the 10% mark. Defaults maintained course and fell to 9.45% with a 40 bps improvement. Current chargeoff performance is 27% lower year over year and is now back in line with the historical average of 9.34%.
Issuers ABS pools covered in the index include Citibank (South Dakota) N.A., GE Money Bank, and World Financial Network National Bank which comprise more than 165 retailer card programs. Fitch attributes improvements to consumer cutbacks in credit use, a pattern Mercator also notes in its consumer surveys and tracking of industry statistics:
‘Consumers are curtailing spending and charging less while at the same time cleaning up their household balance sheets,’ said Managing Director Michael Dean. ‘In an uncertain economic environment, this is a plus for retail card ABS performance, which has improved rapidly and shows no signs of reversing course.’
Click here for more: http://www.reuters.com/article/2011/08/12/idUS142386+12-Aug-2011+BW20110812
