Credit card asset-backed securities likely will remain stable for the foreseeable future because card charge-offs and delinquencies are at historic lows, consumer bankruptcies keep falling and consumer balance sheets are getting healthier, according to Standard & Poor's Ratings Services.
"Our credit card [asset-backed securities] ratings expectations do, however, reflect the current compositions of rated credit card trusts," Fitch research analyst Erkan Erturk said in a press release. "For example, if there was a sizable influx of accounts whose borrowers had less-predictable credit profiles and payment behaviors, charge-offs and delinquencies could increase."
Tighter underwriting standards among U.S. credit card lenders and borrower efforts to improve their debt profiles have bolstered credit card asset-backed securities performance in recent years, and Fitch predicts the trend will continue over the next 12 months.
Among the assumptions Standard & Poor's used for its outlook on U.S. credit card asset-backed securities included a 5.9% increase in consumer credit outstanding this year driven primarily by the growth in auto and student loan debt instead of credit cards. Fitch also predicts the unemployment rate will remain elevated and stay above 8% through late 2013.
Personal bankruptcies likely will fall further as consumers' finances continue to improve, but bankruptcy filings will remain flat in 2013, Fitch says.