As credit card-backed securities’ performance measures posted flat results last month, news of big name portfolio sales shook the industry and dominated headlines, according to the Fitch report, “Credit Card Movers & Shakers,” to be published later this week. In a span of eight days toward month end, the parent companies of Advanta and AT&T Universal, which maintain two of the industry’s largest portfolios, uncovered plans to shed their credit card operations. Meanwhile, Chase Manhattan Corp. signaled its commitment to the business by acquiring Bank of New York’s card portfolio. The news comes amid a period of stability in credit card performance measures, which could be driving the recent spate of portfolio transactions.
As detailed in the report, the stabilizing trends, particularly in terms of chargeoffs, indicate issuers’ tightened underwriting standards and intensified collection efforts are finally taking hold and helping to offset the ill effects of intense competition in the mid-1990s, as well as the record pace of personal bankruptcy filings over the past two years. Fitch expects the performance indexes to remain level through year end and improve slightly in early 1998.
However, as pointed out in the report, while the recent trends are a welcome change from the two-year period of asset quality deterioration that bottomed in May 1997, investors should note that chargeoffs still remain significantly above historical levels and well above even the year-ago 5.45% mark. Furthermore, bankruptcies continue to play a major part in chargeoffs and are expected to increase throughout 1998, although at a slower pace than this year.
For a copy of the report, call 800-85-FITCH or visit the Fitch web site at [‘www.fitchinv.com’].