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European And U.K. Credit Card ABS Index Report Q3 2023

The interactive version of this report is available at www.spratings.com (free of charge). This includes interactive charts to capture data on total delinquencies, payment rates, and charge-off rates for U.K. and European credit cards collateral.

Table 1

Key performance indicators: U.K.
Index (%) Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022
Total delinquency rate* 1.3 1.4 1.4 1.4 1.4 1.5
Charge-off rate* 3.2 2.9 2.9 3.0 2.9 3.1
Payment rate* 33.2 33.1 32.9 32.6 33.1 32.3
Yield rate* 15.6 15.0 15.6 15.7 15.1 14.5
Net spread* 12.4 12.2 12.7 12.7 12.3 11.4
Economic data
Unemployment rate (%)§ 4.3 4.2 3.80 3.60 3.70 3.80
Individual insolvencies§ 24,418 25,956 27,432 29,352 28,946 32,305
Y-O-Y GDP growth§ N.A. 0.6 0.5 0.7 2.1 3.9
*The quarterly performance data reflect 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. N.A.--Not available. Source: S&P Global Ratings.

Table 2

Key performance indicators: Continental Europe
Index (%) Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022
Total delinquency rate* 1.8 1.9 1.8 1.8 1.7 1.7
Charge-off rate* 3.3 1.8 1.6 2.1 1.4 0.9
Payment rate* 26.8 29.1 26.6 25.2 25.4 26.7
Yield rate* 17.7 17.5 17.1 16.5 16.8 16.9
Net spread* 14.3 15.7 15.4 14.4 15.5 16.1
Unemployment rate (%)
France§ 7.5 6.7 7.2 7.3 7.3 7.1
Spain§ 11.8 11.6 13.3 12.9 12.7 12.5
Switzerland† 2.0 1.9 2.0 2.1 1.9 2.0
Y-O-Y GDP growth
France§ 0.7 1.1 1.0 0.8 1.3 4.2
Spain§ 1.8 2.0 4.1 3.8 5.4 6.8
Switzerland† N.A 0.50 1.50 0.70 0.90 2.40
*The quarterly performance data reflect the three-month average performance during the quarter, rather than the value as of quarter-end. For example, the data for first quarter reflect the average performance for January, February, and March, rather than the value for March alone. Y-O-Y--Year-on-year. N.A.--Not available. Sources: §ECB/Eurostat, †State Secretariat for Economic Affairs (SECO), as of Sep. 30. Source: S&P Global Ratings.

Table 3

Scenarios for U.K. and European credit card ABS collateral
Actual Forecast
2022 2023f 2024f 2025f 2026f Baseline effect on collateral credit quality
Real GDP (%) change
U.K. 4.3 0.4 0.4 1.5 1.6 Somewhat unfavorable
France 2.5 0.8 0.9 1.5 1.4 Neutral
Spain 5.5 2.1 1.6 2.2 2.2 Somewhat favorable
Switzerland 2.1 0.6 1.2 1.4 1.5 Neutral
Unemployment rate (%)
U.K. 3.7 4.3 4.7 4.4 4.2 Neutral
France 7.3 7.3 7.5 7.5 7.3 Neutral
Spain 12.9 12.1 12.1 12.0 11.8 Somewhat unfavorable
Switzerland 4.3 4.0 4.0 3.9 3.9 Neutral
U.K. CPI inflation (%) 9.1 7.5 2.5 2.0 2.0 Unfavorable
Bank of England policy rate Q4 average (%) 3.25 5.25 4.43 2.60 2.48 Unfavorable
ECB policy rate Q4 average (%) 2.50 4.25 3.75 2.50 2.50 Unfavorable
Swiss National Bank policy rate Q4 average (%) 1.0 2.0 1.3 1.0 1.0 Somewhat unfavorable
CPI--Consumer price index. f--Forecast. Sources: Oxford Economics and S&P Global Ratings.

U.K. ABS Credit Card Focus

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Table 4

Issuers versus the index - September 2023
Outstanding amounts (mil. £) Trust as percentage of U.K. index (%) Yield rate (%) Payment rate (%) Charge-off rate (%) Total delinquency rate (%)
U.K. index 21,372 15.56 30.92 2.87 1.32
Delamare 3,315 15.51 10.22 42.46 1.69 2.37
Gracechurch 9,850 46.09 14.74 27.58 3.09 0.88
Penarth 7,687 35.97 17.58 31.32 2.41 1.25
Oban Cards 519 2.43 35.45 14.70 13.07 4.18

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 1.81 1.54 6.00 11.60 12.64 8.00 46.95 46.62 30.00
Gracechurch 3.13 2.88 7.50 16.06 15.56 13.50 29.63 29.87 15.00
Penarth 2.27 2.25 6.50 15.29 15.66 13.50 32.56 32.85 17.00
Oban Cards 17.71 33.02 20.00 31.25 34.13 32.00 14.69 15.17 12.00
*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.

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Continental Europe ABS Credit Card Focus

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Table 6

Issuers versus the index - September 2023
Trust Outstanding amount (mil. €) Trust as percentage of index (%) Yield rate (%) Payment rate (%) Charge-off rate (%) Total delinquency rate (%)
EMEA Index 2,594.4 17.66 26.84 3.32 1.78
Gingko 739.6 28.51 9.04 5.06 5.54 2.90
MCCP 454.6 17.52 14.50 6.70 0.67 0.21
Columbus 643.3 24.79 18.69 6.82 6.44 2.04
Swiss Cards 756.9 29.17 27.10 77.24 0.11 1.41

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 3.8 6.4 9.0 18.0 18.2 18.0 6.8 6.8 3.4
Ginkgo 4.1 5.6 7.8 8.4 8.9 7.8 5.2 4.9 1.98
MCCP 0.8 0.9 7.5 13.7 14.2 13.5 5.6 5.6 2.0
Swiss Cards 0.1 0.1 3.5 27.5 27.8 8.0 81.6 82.6 32.0
*In our analysis, we subject base-case rates to stresses, haircuts, and lagging.

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Summary Of Methodology For Our European And U.K. Credit Card ABS Index

What is included in the U.K. and European ABS credit card index?

Unlike our auto and RMBS indexes, we include a transaction as of its closing date. This is because we do not expect a transaction's performance to change materially due to the short-term nature of the receivables. As the index is current balance weighted, and the transactions are revolving master trusts, they do not change as of closing. We have differentiated between European and U.K. transactions due to their different regulatory regimes, currency denominations, and other characteristics.

What is the data source?

We compile data from investor reports based on each deal's definition of arrears and default.

Is it a loan count or "dollar" weighted index?

We calculate the index as the receivables' current balance in each arrear's status (as reported in investor reports), divided by each transaction's current balance (as reported in investor reports). Non-euro denominated transactions are converted to euro.

When a transaction redeems how does it affect the index? Does it affect the past quarter(s)?

When a transaction redeems, it does not contribute to the index beyond that point. It has no effect on reported values for previous quarters.

When do we cut off the index for a given quarter?

We base the cut off point on the period covered in investor reports. For example, if the index is up to Q4 2021, we include collateral data only until Dec. 31, 2021.

Why do prior quarter's numbers sometimes change?

There are two main reasons:

  • The servicer/party providing the investor report can amend data.
  • Newer data for the most recent quarter is available.

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-offs within three months. Therefore, delinquencies--especially 90+ days--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 benefits a transaction, as during the amortization period the note principal is paid down faster, 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 interest on the notes.

Net spread

We define net spread as the three-month average yield rate minus the three-month average charge-off rate.

Related Criteria And Research

This report does not constitute a rating action.

Primary Credit Analyst:Philip Bane, Dublin + 353 1 568 0623;
philip.bane@spglobal.com
Secondary Contacts:Doug Paterson, London + 44 20 7176 5521;
doug.paterson@spglobal.com
Matthew S Mitchell, CFA, Paris +33 (0)6 17 23 72 88;
matthew.mitchell@spglobal.com

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