Fitch: U.S. Credit Card Losses Nearing Historical Norms

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NEW YORK--(BUSINESS WIRE)-- In a Special Report released today, Fitch Ratings noted that U.S. credit card loss metrics showed continued improvement during the first quarter of 2011 (1Q'11), with credit trends likely to be highly correlated with short-term unemployment indicators which have generally trended down from the March 2009 peak.

The average loss rate for the top seven general purpose card portfolios was 6.34% in 1Q'11, an improvement of 345 bps over the average loss rate in 1Q'10 and 82 bps better than 4Q'10. Improvement in portfolio credit trends has yielded significant declines in industry provisioning expense, boosting issuer profitability thus far in 2011.

While credit metrics are currently benefiting issuers' bottom lines, Fitch notes that that contribution will eventually run out as asset quality trends stabilize. Growth in card earnings will then be more dependent on profitable portfolio growth, which will by driven by consumer demand for credit and the competitive pricing environment.

On the legislative front, Fitch believes portfolio growth, pricing, and marketing strategies have yet to be fully tested in the post-CARD Act landscape as issuers have only recently begun to consider portfolio growth.

Fitch's outlook for the U.S. consumer finance sector is Stable for 2011, reflecting Fitch's expectations for improved asset quality trends, modest earnings growth and the maintenance of solid liquidity and capitalization profiles.

Fitch's Special Report, 'Credit Cards: Asset Quality Review 1Q'11' will cover current asset quality trends in the credit card market and provide updated growth and asset quality statistics for some of the largest credit card issuers in the U.S. The full report is available at 'www.fitchratings.com.'

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

Applicable Criteria and Related Research: Credit Cards: Asset Quality Review 1Q11

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=626709

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