Fitch forecasts charge-offs increase along with healthy ABS levels

The latest figures cited in the Fitch's Retail Credit Card index show that U.S. retail credit card charge-offs will definitely increase in the coming months as long as more borrowers are becoming delinquent. Current charge-off index is 40% higher than in 2007 with the number expected o exceed 12% in the first half of 2009 from the current level of 9.1%.

Managing Director Mike Dean reports that ‘Fitch expects a scenario akin to nearly one in eight cardholders defaulting on their store cards’. The latest Fitch Retail Credit Card Index results indicate that 60+ day delinquencies have risen nearly 24% since August reaching 4.8% in the most recent period. Yet, excess spread levels for retail card portfolios remain robust which is expected to insulate against any negative retail card ABS rating actions near term. Even with Fitch's charge-off projections, retail card excess spread should hold above 5%, a level considered healthy for credit card ABS, for the intermediate term.

Fitch's Retail Credit Card index tracks more than $72 billion in principal receivables backing approximately $40 billion of retail or private label credit card ABS. The largest issuers in the index are Citibank Omni Master Trust and GE Private Label Master Trust. Major retailers include WalMart, Sears, Home Depot, Federated, Loews, J.C. Penny, The Limited Stores, Best Buy, Lane Bryant, and Dillard's among others.