Fitch: U.S. Credit Card Losses Nearing Bottom Although Industry Earnings Will Decline Further

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NEW YORK--(BUSINESS WIRE)-- Segment earnings will decline most U.S. credit card issuers over the remainder of 2012 due to higher provision expenses, despite net-charge off rates hitting the lowest level in five years, according to Fitch Ratings.

The average net charge-off rate for the top seven general purpose card issuers was 4.53% in the third quarter of 2011 (3Q'11); down 363 basis points (bps) year over year and 185 bps below the average loss rate reported during 2006-2010. Fitch expects losses to rise modestly in 2012, given recent stabilization in delinquency rates. Net charge-offs could further decline modestly in the 4Q'11. Credit card asset quality trends remain highly correlated with short-term unemployment indicators.

Strong asset quality trends supported meaningful reserve releases over the last year. Through the first nine months of 2011, card segment provision expenses fell 69.9%, on average, for the largest issuers versus the same period in 2010. This trend boosted segment returns above historical ranges for most issuers.

Fitch notes that credit metrics may not reach historical averages for some time, given changes in underwriting criteria and a broader focus on card transactions over revolvers.

Fitch's 'Credit Cards: Asset Quality Review 3Q11' is available at 'www.fitchratings.com.'

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: Credit Cards: Asset Quality Review 3Q11

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654896

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