Fitch: Slower US Job Growth Pinching Retail Credit Card ABS

NEW YORK--(BUSINESS WIRE)-- Recent lags in US economic growth will have a small impact on credit card ABS metrics, Fitch Ratings says. Retail chargeoffs should rise in the next month, but Fitch does not expect this change to carry into the longer term or spread to our prime indices in the coming months. Further, we expect our ratings of credit card ABS deals to remain stable.

Fitch believes the rise in retail chargeoffs is correlated to the softness in recent macroeconomic data. Negative data is more likely to hit retail indices first as borrowers spend less money on their retail cards and pay off their all-purpose cards (those using the MasterCard or Visa network, for example) before their retail cards. Chargeoffs represent the delinquent accounts that have not made a payment for six months.

The St. Louis Federal Reserve reported that the four-week moving average of initial jobless claims fell to about 259,000 from 276,000 during the first quarter. Since then, the average has fluctuated between 255,000 and 265,000. Spending slowed somewhat in the first quarter as US GDP grew at its slowest quarterly rate in two years.

Fitch's other retail metrics will generally stay near their current readings in the next month. April's 60+ day delinquencies will remain near the 2.3% range they registered in March. Gross yield and monthly retail payment rates are projected to increase slightly.

Fitch expects prime credit card indices to decline but remain near recent records. Prime gross yield will decline but stay in record territory. Chargeoffs and the monthly payment rate will drop slightly and 60+ day delinquencies may drop to below 1%. While not a new record, this level is very low when compared to historical trends. Prime 60+ day delinquencies were in the 3.8% range from 2008 to 2010 and hit a high of 4.54% in December 2009.

We expect our ratings on ABS deals to remain stable throughout this softness in the US macroeconomic scene. We believe the impact of these macroeconomic pressures will be sufficiently mitigated by the higher collateral quality and structural enhancements in Fitch-rated credit card ABS deals.

This preliminary data reflects the April reporting period (as of April 30, 2016) and a May distribution date. Actual results will be available in early June.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160524006218/en/

Fitch Ratings
Fernando Gomez
Associate Analyst
+1 646 582-4966
or
Harry Kohl
Director
+1 212 908-0837
or
Rob Rowan
Senior Analyst
Fitch Wire
+1 212 908-9159
or
Media Relations:
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Best Crypto to Buy Now as BTC ETF Outflows Hit $469M While Pepeto Crosses $10.3M Before Listing
• Could Pepeto Be the Best Crypto Presale to Buy as BTC Crashes Below $60K and Fear Hits 12
• Dogecoin Price Prediction: Dogechain Shutdown Tests DOGE Support While Pepeto Presale Passes $10.3 million