Table 1
Key Performance Indicators: U.K. | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Index (%) | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 | |||||||||
Total delinquency rate* | 1.8 | 2.0 | 1.8 | 1.8 | 2.2 | |||||||||
Charge-off rate* | 3.6 | 3.5 | 3.5 | 3.7 | 3.6 | |||||||||
Payment rate* | 27.1 | 25.1 | 25.3 | 22.9 | 19.3 | |||||||||
Yield rate* | 21.0 | 22.0 | 22.1 | 20.3 | 13.9 | |||||||||
Net spread* | 17.4 | 18.5 | 18.6 | 16.7 | 10.3 | |||||||||
Economic data | ||||||||||||||
Unemployment rate (%)§ | 4.8 | 4.9 | 5.1 | 4.8 | 4.2 | |||||||||
Individual insolvencies§ | 28,206 | 26,093 | 30,895 | 21,150 | 32,498 | |||||||||
Y-O-Y GDP growth§ | 22.2 | (6.10) | (7.30) | (8.50) | (21.40) | |||||||||
*The quarterly performance data reflects the three-month average performance during the quarter, rather than the value as of quarter-end. For example, the data for first quarter reflects the average performance for January, February, and March, rather than the value for March alone. §Office for National Statistics, England, and Wales, not seasonally adjusted. Y-O-Y--Year on year. Source: S&P Global Ratings. |
Table 2
Key Performance Indicators: Continental Europe | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Index (%)* | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 | |||||||
Total delinquency rate | 1.2 | 1.5 | 1.7 | 1.8 | 2.3 | |||||||
Charge-off rate | 1.5 | 3.2 | 2.4 | 3.6 | 3.0 | |||||||
Payment rate | 23.3 | 22.4 | 23.0 | 21.2 | 20.2 | |||||||
Yield rate | 16.9 | 17.1 | 17.0 | 16.4 | 17.0 | |||||||
Net spread | 15.0 | 14.1 | 14.0 | 14.6 | 14.1 | |||||||
Unemployment rate (%) | ||||||||||||
France§ | 7.0 | 8.3 | 8.0 | 8.7 | 6.7 | |||||||
Spain§ | 15.3 | 16.0 | 16.1 | 16.3 | 15.3 | |||||||
Switzerland† | 6.1 | 6.1 | 5.1 | 4.1 | 4.1 | |||||||
Y-O-Y GDP growth | ||||||||||||
France§ | 18.7 | 1.7 | (4.2) | (3.6) | (18.7) | |||||||
Spain§ | 19.8 | (4.2) | (8.9) | (8.6) | (21.6) | |||||||
Switzerland† | (1.6) | (1.4) | (7.8) | (0.7) | 1.6 | |||||||
*The quarterly performance data reflects the three-month average performance during the quarter, rather than the value as of quarter-end. For example, the data for first quarter reflects the average performance for January, February, and March, rather than the value for March alone. Sources: §ECB/Eurostat, †State Secretariat for Economic Affairs (SECO), as of Aug 30. S&P Global Ratings. Y-O-Y--Year on year. N.A.--Not available. |
Table 3
Scenarios For U.K. And European Credit Card ABS Collateral | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual | Forecast | |||||||||||||
2020 | 2021F | 2022F | 2023F | 2024F | Baseline effect on collateral credit quality | |||||||||
Real GDP (%) change | ||||||||||||||
U.K. | (9.8) | 7.0 | 5.2 | 1.9 | 1.6 | Favorable | ||||||||
France | (8.0) | 5,6 | 4.2 | 2.0 | 1.7 | Favorable | ||||||||
Spain | (10.8) | 6.3 | 6.4 | 2.9 | 2.3 | Favorable | ||||||||
Switzerland | (3.0) | 3.5 | 3.1 | 1.7 | 1.7 | Favorable | ||||||||
Unemployment rate (%) | ||||||||||||||
U.K. | 4.5 | 5.1 | 4.8 | 4.1 | 4.0 | Unfavorable | ||||||||
France | 8.1 | 8.4 | 8.7 | 8.3 | 7.8 | Unfavorable | ||||||||
Spain | 15.6 | 15.8 | 15.0 | 14.5 | 14.0 | Unfavorable | ||||||||
Switzerland | 4.8 | 4.9 | 4.8 | 4.6 | 4.4 | Somewhat Unfavorable | ||||||||
U.K. CPI inflation (%) | 0.9 | 1.7 | 1.9 | 1.7 | 1.7 | Somewhat Unfavorable | ||||||||
Bank of England policy rate Q4 average (%) | 0.10 | 0.10 | 0.10 | 0.20 | 0.42 | Somewhat Favorable | ||||||||
ECB policy rate Q4 average (%) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | Somewhat Favorable | ||||||||
Swiss National Bank policy rate Q4 average (%) | (0.75) | (0.75) | (0.75) | (0.75) | (0.5) | Somewhat Favorable | ||||||||
CPI--Consumer price index. Sources: Oxford Economics, S&P Global Ratings. |
Summary
Overview
- In June 2021, Columbus Master Credit Cards Fondo de Titulizacion, series 2021-01's issuance proceeds were used to redeem the outstanding series 2019-01 notes.
- Since the end of Q1, the seller of the Columbus Master Credit Cards Fondo de Titulizacion transaction initiated the purchase of non-simple, transparent, and standardized (STS)-compliant assets, mainly charged-off assets, those in arrears, and others that may have been restructured. This was to allow the Columbus 2021-01 transaction to comply with the European STS regulations when the series 2021-01 notes were issued. The purchase of these assets consequently affected the transaction's performance in Q2. We expect to see performance normalizing.
- Quarter-on-quarter charge-off rates for the continental European indexes continue to decrease, indicating improving credit performance. The increase in the U.K. index is due to the introduction of the Oban Cards 2021-1 PLC transaction, which targeted non-prime obligors, differing from peer U.K. issuers in the index.
U.K.
- Charge-offs in our U.K. credit card ABS index remained stable (10 basis points change) quarter-on-quarter. Gracechurch's charge-off rate was 4.2%, lower than its 12-month average of 4.3%. The Delamare transaction incurred a charge-off rate of 1.9% in Q2, lower than its 12-month average of 2.4%. Penarth's charge-off rate in Q2 was 2.8% compared with a 12-month average of 2.7%. Oban Cards 2021-1 PLC's annualized charge-off rate was 11.3%.
- Total delinquencies decreased quarter-on-quarter to 1.8% from 2.0%.
- The yield rate decreased to 21.0% from 22.0% quarter-on-quarter. This was mainly due to the yield reduction in the Penarth transaction (to 13.3% from the 14.8% three-month average).
- Delinquencies in the Delamare transactions exceeded other peer transactions, due to a longer default definition, which includes a longer delinquency period.
- As a result of the movements in the yield rate and charge-offs, net spread (the difference between the yield rate and charge-off rate) decreased quarter-on-quarter to 17.4% from 18.5%.
- Given our base-case economic outlook, we expect U.K. credit card performance could deteriorate over the next 12-24 months, which is reflected in our base-case performance assumptions.
Continental Europe
- Charge-offs in our European credit card ABS index declined (170 bps change) quarter-on-quarter. This was mainly because charge-offs reduced in the Columbus transaction due to the purchase of defaulted assets to comply with European STS regulations. The three-month average charge-off rate is currently 0.0% due to the removal of defaulted assets, compared to a 12-month average of 4.8%. The Columbus transaction represents 18.6% of our European credit card ABS index. In addition, charge-off rates in other transactions have also improved. MCCP's three-month average was 1.0% compared to a 1.3% 12-month average. Ginkgo's three-month average charge-off rate was 3.1% compared to the 3.6% 12-month average and Swiss Cards 0.9% compared to a 1.1% 12-month average. Only Oneycord had a higher three-month average charge-off rate of 2.1% compared to its 2.0% 12-month average.
- Total delinquency rates in our European credit card ABS index continued to decrease in the second quarter of the year, to 1.2% from 1.5%. Charge-off rate performance improved, decreasing to 1.5% from 3.2%.
- Yield rates decreased in the second quarter to 16.9% from 17.1%, and the payment rate increased to 23.3% from 22.4%.
- Charge-off rates are generally higher for Spanish and French credit card programs than Swiss.
- Yield rates are generally lower in France, partly due to a legal cap imposed on the rate that a lender can charge on these products ("taux d'usure"). Yield rates are generally higher in the Spanish credit card programs compared with the rest of the region.
- High payment rates in Switzerland show that the attitude toward consumer credit in the country appears to be an outlier relative to its European peers. In France, payment rates tend to be low as, subject to stringent rules, the full repayment of a loan may happen over a defined maximum period.
- In our analysis of revolving credit cards in Spain, we have already considered the enforceability of the receivables relating to the usury rate, and our current assumptions are accounting for this risk factor. We anticipate that yields in Spanish transactions will decline due to usury rulings.
- Given our base-case economic outlook, we expect that European credit card performance could deteriorate over the next 12-24 months, which is reflected in our base-case performance assumptions.
U.K. ABS Credit Card Focus
Chart 1
Chart 2
Table 4
Issuers Versus The Index - June 2021 | ||||||
---|---|---|---|---|---|---|
Outstanding amounts (million £) | Trust as percentage of U.K. index (%) | Yield rate (%) | Payment rate (%) | Charge-off rate (%) | Total delinquency rate (%) | |
UK Index | 18,115 | 22.6 | 29.7 | 3.6 | 1.8 | |
Delamare | 3,068 | 16.9 | 11.0 | 40.7 | 1.3 | 2.8 |
Gracechurch | 8,238 | 45.5 | 33.1 | 27.1 | 4.2 | 1.5 |
Penarth | 6,281 | 34.7 | 13.7 | 29.0 | 3.1 | 1.3 |
Oban Cards | 528 | 2.9 | 31.7 | 14.9 | 10.9 | 5.4 |
Table 5
Performance Against Base-Case Assumptions | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Charge-off rate (%) | Yield rate (%) | Payment rate (%) | ||||||||||||||||||
Trust | 12-month average | Three-month average | Base case* | 12-month average | Three-month average | Base case* | 12-month average | Three-month average | Base case* | |||||||||||
Delamare | 2.4 | 1.9 | 6.0 | 11.7 | 11.3 | 8.0 | 35.9 | 39.5 | 25.0 | |||||||||||
Gracechurch | 4.3 | 4.2 | 7.5 | 28.7 | 29.7 | 13.5 | 21.5 | 23.7 | 15.0 | |||||||||||
Penarth | 2.7 | 2.8 | 6.5 | 14.8 | 13.3 | 13.5 | 25.8 | 26.6 | 17.0 | |||||||||||
Oban Cards | N/A | 11.3 | 20.0 | N/A | 31.4 | 32.0 | N/A | 15.0 | 12.0 | |||||||||||
*In our analysis, we subject base case rates to stresses, haircuts, and lagging. For the yield rate, these values cannot be directly compared with our base-case assumptions because they include interchange, which we do not give credit for in our analysis. N/A--Not applicable. |
Chart 3
Chart 4
Chart 5
Chart 6
Chart 7
Chart 8
Continental Europe ABS Credit Card Focus
Chart 9
Chart 10
Table 6
Issuers Versus The Index - June 2021 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trust | Outstanding amount (mil. €) | Trust as percentage of index (%) | Yield rate (%) | Payment rate (%) | Charge-off rate (%) | Total delinquency rate (%) | ||||||||
EMEA Index | 3,247.1 | 16.9 | 23.3 | 1.5 | 1.2 | |||||||||
Gingko | 709.7 | 21.9 | 7.9 | 6.2 | 3.3 | 1.9 | ||||||||
MCCP* | 499.6 | 15.4 | 13.5 | 6.7 | 0.7 | 0.2 | ||||||||
Columbus** | 604.0 | 18.6 | 19.9 | 7.3 | 0.0 | 0.3 | ||||||||
Oneycord | 735.4 | 22.6 | 14.0 | 8.5 | 2.0 | 2.4 | ||||||||
Swiss Cards | 698.4 | 21.5 | 29.0 | 82.0 | 1.0 | 0.7 | ||||||||
*The series 2017-1 notes have been called, and new notes were issued in October 2019. | ||||||||||||||
** The series 2019-1 have been called and new notes were issued in June 2021. |
Table 7
Performance Against Base-Case Assumptions | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Charge-off rate (%) | Yield rate (%) | Payment rate (%) | ||||||||||||||||||
Trust | 12-month average | Three-month average | Base case* | 12-month average | Three-month average | Base case* | 12-month average | Three-month average | Base case* | |||||||||||
Columbus | 4.8 | 0.0 | 10.0 | 20.5 | 19.2 | 18.5 | 7.2 | 7.2 | 3.4 | |||||||||||
Gingko | 3.6 | 3.1 | 7.8 | 8.2 | 7.9 | 7.9 | 5.6 | 6.1 | N/A | |||||||||||
MCCP† | 1.3 | 1.0 | 8.0 | 13.6 | 13.3 | 13.8 | 5.9 | 5.8 | 1.9 | |||||||||||
Oneycord | 2.0 | 2.1 | 9.0 | 13.8 | 13.6 | 13.5 | 8.0 | 8.4 | 8.0 | |||||||||||
Swiss Cards | 1.1 | 0.9 | 3.5 | 28.0 | 28.6 | 8.0 | 77.7 | 79.1 | 32.0 | |||||||||||
*In our analysis, we subject base-case rates to stresses, haircuts, and lagging. For the yield rate, these values cannot be directly compared with our base-case assumptions because they include interchange, which we do not give credit for in our analysis. †The series 2017-1 notes have been called, and new notes were issued in October 2019. |
Chart 11
Chart 12
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Chart 14
Chart 15
Chart 16
Glossary
Delinquency rate
Delinquency data are a leading indicator for the underlying proportion of accounts that roll through the delinquency categories before the debt is charged off. A high proportion of 90+ day delinquencies will typically roll through to charge-off within three months, and so delinquencies, and especially 90+ day delinquencies, are a good indicator of how the charge-off index might perform.
Charge-off rate
We define charge-offs as losses on principal receivables divided by the pool balance at the beginning of the month, which is annualized and expressed as a percentage. They are effectively gross losses.
Payment rate
We define the payment rate as the total collections received in a particular month divided by the pool balance at the beginning of the month, expressed as a percentage. In our view, a high payment rate is beneficial for the transaction as during the amortization period the note principal is paid down more quickly, meaning noteholders are exposed to losses for a shorter period.
Yield rate
We define yield as finance charge and fee income in a particular month divided by the pool balance at the beginning of the month, annualized and expressed as a percentage. We believe high-yield is beneficial for the transaction, as it means a higher income to offset any losses and pay the interest on the notes.
Net spread
We define net spread as three-month average yield rate minus three-month average charge-off rate.
Related Criteria And Research
- Global Structured Finance: Charting The Recovery From COVID-19, June 14, 2021
- Economic Research: Why The U.K.'s Worse Recession Should Turn Into A Stronger Recovery, May 12, 2021
- Economic Research: U.K. Recovery: Delayed But Stronger, May 9, 2021
- European Economic Snapshots Say Conditions Are In Place For A Strong Rebound, April 28, 2021
- European Economic Snapshots Unlike The Rest Of Europe, The U.K. Is Looking Beyond COVID-19, April 28, 2021
- The ESG Pulse: A Spotlight On Structured Finance, April 28, 2021
- Economic Outlook Europe Q2 2021: The Path To A Strong Restart, March 25, 2021
- European Structured Finance Market Accelerates Transition From LIBOR, Feb. 9, 2021
- ESG Credit Factors In Structured Finance, Sept. 19, 2019
- EMEA Structured Finance Surveillance Chart Book, published periodically
- European Credit Card ABS: Assessing The Credit Effects Of COVID-19, April 9, 2020
- European ABS And RMBS: Assessing The Credit Effects Of COVID-19, March 30, 2020
- COVID-19 Will Batter Global Auto Sales And Credit Quality, March 23, 2020
- 2017 EMEA ABS Scenario And Sensitivity Analysis, July 6, 2017
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- European Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- Revised Rating Approach Effective For European Credit Card ABS, July 11, 2016
- How We Rate And Monitor EMEA Structured Finance Transactions, March 24, 2016
- Global Methodology And Assumptions For Assessing The Credit Quality Of Securitized Consumer Receivables, Oct. 9, 2014
- Global Framework For Cash Flow Analysis Of Structured Finance Securities, Oct. 9, 2014
- Scenario Analysis: Charge-Off And Payment Rate Movement May Determine Downgrades In European Credit Card Sector, May 12, 2009
This report does not constitute a rating action.
Primary Credit Analyst: | Amit Einhorn, London +44 (0)20 7176 0513; amit.einhorn@spglobal.com |
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