Fitch: US Rate, Debt Rises Unlikely to Hurt Credit Card ABS

NEW YORK--(BUSINESS WIRE)-- The Federal Reserve's plan to moderately raise interest rates should a have minimal impact in the short to middle term for credit card ABS metrics, Fitch Ratings says. As performance has been near records for some time, we expect any potential declines to leave it in a still healthy range.

The Federal Open Market Committee voted on Dec. 18 to set the new target range for the federal funds rate at 0.25% to 0.5%, and forecasted a rate of 1.375% by the end of 2016. Short-term rates at this level will not affect the vast majority of credit card borrowers and ABS metrics. In addition, the December report by the Board of Governors of the Federal Reserve showed that consumer credit overall rose at a 5.5% annual rate (seasonally adjusted). Revolving credit rose 0.25%, while non-revolving credit increased 7.5%.

Prime chargeoffs are expected to increase for the third straight month; 60+ day delinquencies will also tick up. Gross yield will likely rise by a healthy margin and the prime monthly payment rate (MPR), which measures how quickly borrowers pay back their balances, should decline within its historical range.

Retail 60+ day delinquencies and retail chargeoffs are expected to rise slightly. Gross yield and MPR are expected to rise near its recent range.

This preliminary data reflect the November reporting period (as of November 30, 2015) and December distribution date. Actual results will be available in early January.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20151222005621/en/

Fitch Ratings
Stephanie Lobacarro
Analyst
US Structured Finance
+1 212 908-0769
33 Whitehall Street
New York, NY
or
Rob Rowan
Senior Director
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Source: Fitch Ratings

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