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YTD Credit Card ABS Issuance Doubles 2011's


In a short note this morning, Standard & Poor's analysts stated that despite the comparatively weak demand for credit card debt, year-to-date ABS issuance in the sector has doubled its total for all of 2011.

With year-to-date issuance reaching $34 billion, analysts expect full-year 2012 issuance in credit card ABS to reach roughly $40 billion. The increase is happening as banks diversify funding sources away from bank deposits, they said.

However, there are headwinds on the horizon that might affect this forecast. S&P analysts mentioned that the Federal Reserve reported a 4.1% or $3 billion decrease in revolving debt in September, which can limit credit card issuers from accessing the securitization market.

In terms of performance, Moody's investors Service said yesterday it expects credit card ABS will dip slightly for two months because of Sandy. The agency said that customers in the areas impacted by the hurricane will find it hard to make card payments.

Despite the fact that the storm affected a "broad and densely populated part of the U.S.," Moody's said that the effect on card trust performance will be limited as a result of the geographic diversification of the trusts. The hurricane will also only have a slight impact on Moody's-rated securitized trusts.

The rating agency said that the principal payment rate (PPR) and yield will decrease slightly while delinquencies and charge-offs can increase marginally for the October and November reporting periods.

The rating agency explained that geographic diversity assists in protecting credit card trusts from regional disasters like this hurricane. Cardholder receivables in New York and New Jersey are only about 12% of the receivables in Moody’s Credit Card Index, which comprises the “Big Six” card issuers.

Moody's added that even though a substantial portion of residents in these areas skip a payment, the impact on the trusts’ PPR and yield will be comparatively small. 

In other consumer sectors, Citigroup Global Markets analysts said yesterday that they are projecting that auto ABS prepayments resulting from Sandy might rise siightly by at most 1CPR to 2CPR over the next three months. Analysts estimated that Sandy-damaged cars might potentially comprise up to 4% of all cars registered in New York and New Jersey.

Meanwhile, S&P analysts are anticipating an increase in used vehicle prices in the next few months given that consumers are replacing hurricane-damaged cars.


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