U.S. credit card ABS chargeoffs fell to a record low in December to finish 2012 on a positive note, according to index results from Fitch Ratings.
Prime credit card chargeoffs dipped below four percent for the first time since 2006, falling to 3.98 percent in December. Chargeoffs have declined 29.43 percent since the end of 2011, according to Fitch's Prime Credit Card index.
Late stage delinquencies increased three basis points in December to 1.73%. Despite that, late payments remained relatively steady around the 1.70 percent mark for the past four months, a sign that delinquencies are stabilizing and could be a sign that chargeoffs will plateau in the coming months.
Last year, Fitch's 60+ Day Delinquency Index fell by almost 25 percent year-over-year.
Gross yield slipped slightly this month by 19 bps to 18.18%. This is in line with the average for 2012 of 18.19% and not far off the historical average of 18.56%. On the whole, gross yield has remained fairly stable this year, only decreasing 3.45% since the end of 2011.
Despite a decline in gross yield, three-month average excess spread has reached an all-time high of 11.51%, surpassing the previous high of 11.38% last month. The increase in excess spread is being driven by the decline in chargeoffs.
Total ABS outstandings increased last September for the first time since December 2011. But the balance since then has declined each month and is now under the $100 billion mark for the first time since December 1995. Outstandings have declined by 25.85 percent over the past year as ABS notes mature and are not replaced by new issuance.
Fitch's Prime Credit Card Index was started in 1991 and tracks more than $99 billion of prime credit card ABS backed by approximately $263 billion of principal receivables. The index is mostly comprised of general purpose portfolios originated by large institutions such as Bank of America, Capital One, Chase, Citibank, Discover, etc.
Fitch's Retail Credit Card Index performance showed improvement in December, with the exception of chargeoffs.
Chargeoffs increased 4.69 percent to 6.69 percent after dropping nearly 20 percent throughout most of last year. Chargeoffs are still well below the historical average of 9.09 percent. Sixty-plus day delinquencies have been stabilizing around 2.70 percent for the past seven months after peaking in early 2009.
The retail index tracks more than $27 billion of retail or private-label credit card ABS backed by approximately $50 billion of principal receivables. The index is mostly comprised of portfolios originated and serviced by Citibank, GE Money Bank and World Financial Network National Bank. More than 165 retailers are incorporated including Walmart, Sears, Home Depot, Federated, Loews, J.C. Penney, Limited Brands, Best Buy, Lane Bryant and Dillard's.