U.S. Credit Card ABS Delinquencies Beginning to Rise

Fitch Ratings' preliminary index results indicate that prime 60+ day delinquencies will rise, ending a streak of six straight months of decline. We also expect an increase in Fitch's preliminary Retail 60+ Day Delinquency Index. We expect collateral performance to be stable for the rest of this year and to remain above pre-crisis levels, despite this likely increase in delinquencies. Continued rating stability in the sector is anticipated.

Seasonality supports our view that delinquencies will increase slightly for the remainder of the year. A similar seven-month streak was broken at the same time last year. Fitch's preliminary Prime Monthly Payment Rate (MPR) Index also shows that a seasonal decline is in store. As a result, MPR will fall from its all-time high reached in September 2013. Gross yield is expected to increase despite normally realizing a decline for the September reporting period.

On a more positive note, Fitch's preliminary Prime Chargeoff Index is anticipated to decline for the sixth straight month. This would mark another seven-year low for chargeoffs.

Preliminary results for retail credit cards are likely to slip. Fitch's preliminary Retail 60+ Day Delinquency Index is expected to increase for the fourth straight month, indicating an upturn in chargeoffs for at least the remainder of the year. Chargeoffs are anticipated to decline slightly month over month. Fitch's preliminary Retail MPR Index indicates a decline after an uptick in the previous month. Gross yield looks to be favorable for the September reporting period with a slight increase anticipated.

Actual results for Fitch's Prime and Retail Credit Card indices will be available in early November.

Additional information is available on www.fitchratings.com.

To subscribe or visit go to:  http://www.riskcenter.com

http://riskcenter.com/articles/story/view_story?story=99915955