Summary
- Notwithstanding challenging macroeconomic conditions, credit card performance remained mostly resilient in Q3 2023.
- Charge-offs increased slightly to 3.2% from 2.9% in our U.K. credit card ABS index quarter-on-quarter, while they increased to 3.3% from 1.8% in our European credit card ABS index. The European increase is due to a one-month charge-off spike for Oban Cards 2021-1 PLC.
- Delinquencies remained relatively unchanged quarter-on-quarter, with total delinquencies decreasing by 0.1% in both our European and U.K credit card ABS indices. Furthermore, 90+ day delinquencies were stable across both indices.
- Payment rates increased by 0.10% in our U.K. credit card ABS index quarter-on-quarter but decreased by 2.3% in our European credit card ABS index.
- Net spread (the difference between the yield rate and charge-off rate) increased quarter-on-quarter in our U.K. credit card ABS index to 12.4% from 12.2%. In our European credit card ABS index, net spread decreased quarter-on-quarter to 14.3% from 15.7%. Again, the latter is due to the one-month charge-offs spike for Oban Cards 2021-1 PLC.
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
Chart 1
Chart 2
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. |
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 - 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. |
Chart 11
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Chart 13
Chart 14
Chart 15
Chart 16
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
- Credit Conditions Europe Q4 2023: Resilience Under Pressure Amid Tighter Financial Conditions, Sept. 26, 2023
- European Credit Card ABS On Course For A Soft Landing Despite The Cost Of Living Crisis, July 20, 2023
- European RMBS And ABS Monitor H1 2023, July 19, 2023
- Credit Conditions Europe Q3 2023: The Slow Burn of Rising (Real) Rates, June 27, 2023
- U.K. RMBS And ABS LIBOR Transition: Beware Of Early Success, Sept. 5, 2022
- Global Consumer ABS Methodology And Assumptions, March 31, 2022
- European Structured Finance Market Accelerates Transition From LIBOR, Feb. 9, 2021
- 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 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: | 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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