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Feb 07 - In its latest quarterly UK Credit Card Index, Fitch Ratings notes that credit card ABS produced the strongest performance on record last year. Performance for UK credit card trusts continued to improve throughout Q412, with charge-off rates and delinquency rates decreasing even further from their historical low levels reached in Q312.
Given the decreasing late delinquencies and signs of improvements in the UK economy (such as the fall in the unemployment rate and individual insolvencies in Q412), the charge-off index is expected to stay stable or improve slightly in the coming months. However, Fitch expects delinquencies and charge-offs to start increasing slightly in H213 considering that a triple-dip recession is now a real risk for the UK economy given the contraction in output over the same period and current levels in delinquencies and charge-offs are - in Fitch's view - unsustainable in the long term. Yield and payment rates are expected to remain fairly stable in 2013.
The three-months rolling charge-off index improved to 4.4% in Q412 compared with 5.8% in Q312, more than the agency's expectation. The three-months rolling 60-180 Day Delinquency Index declined to 1.8% in Q412 from 1.9% in the previous quarter, continuing to test its lowest level seen since index inception in 2002.
The Fitch Gross Yield Index value for December 2012 remained almost stable at 20.7%, representing a slight quarter-on-quarter decrease of 30bps. The Fitch Monthly Payment Rate Index increased to 19.3%, slightly above the range of 16.0%-19.0% broadly seen in the past 10 years and confirming the consumer trend of deleveraging.
Fitch's outlook for UK credit card asset performance and ratings outlook remain stable.
There was no new issuance backed by UK credit card receivables in Q412. The agency decided to exclude Barclays' Cumbernauld trust from its index calculation due to distortion of the performance metrics driven by accumulation of monies for repayment of the last outstanding note in February 2013. Overall the index composition was slightly impacted by this and the value of collateral tracked by the Index dropped to GBP26.9bn at the end of Q412.
The full report, entitled 'Credit Card Index - UK - Q4 2012', is available at www.fitchratings.com or by clicking on the link below.
Link to Fitch Ratings' Report: Credit Card Index UK - Q4 2012
