As such, Fitch expects credit card ABS ratings outlook to remain stable throughout 2009 as ample levels of credit and structural protections remain available to benefit investors and support existing ratings in spite of the performance pressures.
The latest Fitch Index results show chargeoffs on prime credit card portfolios rising to four-year highs and monthly payment rates, the rate at which cardholders repay outstanding balances, slowing to their lowest levels since mid-2004. Fitch expects its prime chargeoff index - now at 6.84% and 31% higher than year earlier levels - to reach 8% during 2009 as unemployment continues to rise. Cardholders also cut back on their monthly payments last month, with Fitch's Prime MPR Index falling 246 basis points month-over-month to 15.96%, the largest one month drop on record.
Retail or store card chargeoffs, meanwhile, surged to three-year highs as anticipated in light of the recent run up in delinquencies. At 10.51%, Fitch's Retail Card Chargeoff Index is currently 49% above year-earlier levels and, given the recent delinquency trends, Fitch expects the rate to surpass 12% by midyear. Balances more than 60 days past due have risen more than 34% since July, reaching 5.08% in the most recent period. While Fitch expects retail card chargeoffs to remain elevated in the months to come, the pace of increase in delinquencies showed signs of slowing last month relative to the prior two.
Despite the increase in both chargeoffs and defaults, prime and retail card three-month excess spread levels are holding steady at 5.51% and 9.34%, respectively. The effect of higher chargeoffs on excess spread levels is being offset by issuers' proactive re-pricing efforts and the more recent lower funding costs. Following a spike in LIBOR in early fourth quarter, bond coupons have come down significantly and are expected to benefit excess spread levels going forward.
