NEW YORK, June 26 /PRNewswire/ -- Bank credit card charge-off rates
increased in May 2000, according to Standard & Poor's Credit Card Quality
Indexes (see list). These indexes monitor the performance of approximately
$300 billion in receivables held in trusts of publicly rated credit
card-backed securities, which make up nearly two-thirds of the total bank card
market. Issuers distributed May performance data on June 15, 2000.
The monthly charge-off rate rose to 6.2% in May 2000 from 5.6% in April
and 5.7% in March, respectively. However, most of the increase in the index
loss rate was attributable to a policy change at Bank One N.A./First USA Bank
(First USA). Without First USA's policy change, the indexes' average
charge-off rate would have increased very modestly. Delinquencies stayed flat
at 4.2% in May, down from the 4.3% level reported in April. The delinquency
rates for the year have been lower than last year's levels and have stayed
below the 4.5% barrier for three consecutive months. This positive trend
indicates that losses will remain fairly stable and under 6.00% for the
upcoming months.
The loss increase in May 2000 was largely attributable to the statistics
reported by First USA and its affiliates. To comply with the new FFIEC
regulations, Bank One/First USA will now charge off bankrupt and deceased
accounts 60 days after notification. Prior to this change, First USA and its
affiliates charged off bankrupt accounts at 90 days and deceased accounts at
180 days. Accelerating charge-offs will result in a one-month increase in
losses for the related First USA affiliated trusts. Bank One Credit Card
Master Trust losses jumped 350 basis points (bps) this month; Chevy Chase
Master Credit Card Trust II losses increased by 100 bps; First Chicago Master
Trust II losses also increased by nearly 170 bps; and First USA Credit Card
Master Trust loss rates increased by 240 bps. At the same time, the policy
change impacted excess spread levels for all of these trusts. Most notably,
Chevy Chase and First USA saw their excess spread levels compressed to 90 bps
and 100 bps, respectively. This decline represents a 335 bp and a 235 bp drop
from the reported April levels. All four First USA-related trusts are expected
to return to their normal loss and excess spread levels next month. The only
other trust to report an excess spread level below 2% was People's Bank Credit
Card Master Trust The increase in interest rates and loss rates has caused
excess spread to decline somewhat despite an increase in the trust's yield
numbers due to the portfolio repricing. People's excess spread levels dropped
to 1.7% for May, from the 2.5% level reported in April. The average
three-month excess spread level is approximately 2.3%.
Without the change in First USA's charge-off policy, the index charge-off
number for May would have increased slightly by 10 bps -20 bps. The picture
among the other trusts was mixed. Fifteen trusts reported modest increases in
their loss rates and nine reported declines compared to last month's losses.
For the major trusts (those with more than $5 billion in receivables and
excluding the aforementioned affiliated First USA trusts), six trusts reported
increased loss rates ranging from 20 bps-80 bps. The largest increase in
losses was seen in Chase Manhattan Master Trust. Conversely, Providian Master
Trust and Capital One Master Trust both reported improvements in their
charge-offs. Citibank Master Credit Card Trust's losses increased by 10 bps
and MBNA Credit Card Master Trust II's charge-offs stayed flat at 4.7% for the
third consecutive month.
Other than delinquencies and charge-offs, performance trends were mostly
positive in May. Yield increased by 100 bps to help offset the decline in
excess spread levels due to rising loss rates and an increased base rate.
Weighted average cost of funding increased 50 bps to 8.40%. Excess spread
levels dropped 10 bps to 5.3%. On a more positive note, after a 190 bp drop in
April, payment rate rebounded in May to 16.7%. Payment rates since 1998 have
consistently topped 16.0%, Standard & Poor's said. -- CreditWire
STANDARD & POOR'S CREDIT CARD QUALITY INDEXES
Distribution date 6/15/98 6/15/99 4/17/00 5/15/00 6/15/00
Performance month May 98 May 99 Mar 00 Apr 00 May 00
Outstandings (bil. $) 255.8 281.0 303.1 306.70 296.0
Yield (%) 19.1 19.9 20.2 18.9 19.9
Charge-offs (%) 6.6 6.1 5.7 5.6 6.2
Weighted base rate(%) 7.8 7.0 8.2 7.9 8.4
Excess spread (%) 4.7 6.7 6.3 5.4 5.3
Delinquencies (%) 5.1 4.5 4.3 4.2 4.2
Payment rate( %) 14.9 16.5 17.3 15.4 16.7
SOURCE Standard & Poor's
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CONTACT:
Bonnie Lee Tillen, 617-371-0305, or Christina
Lai, 212-438-2522, both of Standard & Poor's
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