Summary
- Despite challenging macroeconomic conditions in 2023 and into 2024, the credit performance of our rated credit card ABS transactions remained mainly unchanged in Q2 2024 year-on-year. Nominal delinquencies remained stable and defaults remained low and within our expectations.
- Charge-offs increased slightly to 3.0% from 2.9% in our U.K. credit card ABS index quarter-on-quarter, while they decreased to 3.3% from 3.7% in our European credit card ABS index.
- Total delinquencies remained relatively unchanged quarter-on-quarter. Furthermore, 90+ day delinquencies were also stable across both our European and U.K. indices.
- Payment rates increased by 1.8% in our U.K. credit card ABS index quarter-on-quarter, while they decreased by 1.3% 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. index (to 13.2% from 12.7%) and European index (to 15.1% from 14.8%).
- The addition of London Cards No.2 PLC--with high payment rates--to our U.K. credit card ABS index partially led to volatile payment rates. This transaction closed in April 2024.
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 (%) | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | Q2 2022 | |||||||||||
Total delinquency rate* | 1.4 | 1.5 | 1.4 | 1.3 | 1.4 | 1.4 | 1.4 | 1.4 | 1.5 | |||||||||||
Charge-off rate* | 3.0 | 2.9 | 2.7 | 3.2 | 2.9 | 2.9 | 3.0 | 2.9 | 3.1 | |||||||||||
Payment rate* | 34.6 | 32.8 | 32.6 | 33.2 | 33.1 | 32.9 | 32.6 | 33.1 | 32.3 | |||||||||||
Yield rate* | 16.2 | 15.7 | 15.7 | 15.6 | 15.0 | 15.6 | 15.7 | 15.1 | 14.5 | |||||||||||
Net spread* | 13.2 | 12.7 | 13.0 | 12.4 | 12.2 | 12.7 | 12.7 | 12.3 | 11.4 | |||||||||||
Economic data | ||||||||||||||||||||
Unemployment rate (%)§ | 4.4 | 4.3 | 4.2 | 4.2 | 4.3 | 3.8 | 3.6 | 3.7 | 3.8 | |||||||||||
Y-O-Y GDP growth§ | N.A | 0.3 | -0.2 | 0.2 | 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 (%) | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | ||||||||||
Total delinquency rate* | 1.9 | 1.8 | 1.8 | 1.8 | 1.9 | 1.8 | 1.8 | 1.7 | ||||||||||
Charge-off rate* | 3.3 | 3.7 | 3.1 | 3.2 | 1.5 | 1.6 | 2.1 | 1.4 | ||||||||||
Payment rate* | 25.9 | 27.3 | 26.7 | 26.7 | 29.0 | 26.6 | 25.2 | 25.4 | ||||||||||
Yield rate* | 18.4 | 18.5 | 18.5 | 17.7 | 17.6 | 17.1 | 16.5 | 16.8 | ||||||||||
Net spread* | 15.1 | 14.8 | 15.3 | 14.5 | 16.1 | 15.4 | 14.4 | 15.5 | ||||||||||
Economic data - EU-19 | ||||||||||||||||||
Unemployment rate (%)§ | 6.5 | 6.7 | 6.7 | 6.7 | 6.5 | 6.5 | 6.7 | 6.7 | ||||||||||
Y-O-Y GDP growth (%)§ | 0.7 | 0.6 | 0.40 | 0.1 | 0.6 | 1.3 | 1.9 | 2.4 | ||||||||||
*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. Sources: §ECB/Eurostat, S&P Global Ratings. |
Table 3
Scenarios for U.K. and European credit card ABS collateral | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
2024f | 2025f | 2026f | Baseline effect on collateral credit quality | |||||||
Real GDP (%) change | ||||||||||
U.K. | 0.6 | 1.2 | 1.7 | Somewhat favorable | ||||||
France | 0.9 | 1.4 | 1.4 | Somewhat favorable | ||||||
Spain | 2.2 | 1.9 | 2.0 | Neutral | ||||||
Switzerland | 1.2 | 1.5 | 1.4 | Neutral | ||||||
Unemployment rate (%) | ||||||||||
U.K. | 4.4 | 4.6 | 4.4 | Neutral | ||||||
France | 7.6 | 7.7 | 7.5 | Neutral | ||||||
Spain | 11.6 | 11.4 | 11.3 | Neutral | ||||||
Switzerland | 4.2 | 4.3 | 4.1 | Neutral | ||||||
CPI (%) | ||||||||||
U.K. | 2.8 | 2.4 | 2.1 | Somewhat favorable | ||||||
France | 2.6 | 2.0 | 1.8 | Somewhat favorable | ||||||
Spain | 3.0 | 2.0 | 2.0 | Somewhat favorable | ||||||
Switzerland | 1.4 | 1.3 | 1.1 | Neutral | ||||||
Bank of England policy rate Q4 average (%) | 4.71 | 3.33 | 3.00 | Somewhat favourable | ||||||
ECB policy rate Q4 average (%) | 3.25 | 2.50 | 2.50 | Somewhat favourable | ||||||
Swiss National Bank policy rate Q4 average (%) | 1.00 | 1.0 | 1.0 | Neutral | ||||||
CPI--Consumer price index. f--Forecast. Sources: Oxford Economics, S&P Global Ratings. |
U.K. ABS Credit Card Focus
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Table 4
Issuers versus the index - June 2024 | ||||||
---|---|---|---|---|---|---|
Outstanding amounts (mil. £) | Trust as percentage of U.K. index (%) | Yield rate (%) | Payment rate (%) | Charge-off rate (%) | Total delinquency rate (%) | |
UK Index | 21,585.86 | 15.78 | 31.99 | 2.67 | 1.43 | |
Delamare | 3,085.37 | 14.29 | 10.92 | 43.36 | 1.69 | 2.97 |
Gracechurch | 10,528.45 | 48.77 | 14.94 | 27.53 | 2.52 | 0.83 |
Penarth | 7,140.47 | 33.08 | 16.51 | 32.22 | 2.51 | 1.42 |
Oban Cards | 512.58 | 2.37 | 33.12 | 14.70 | 15.33 | 5.18 |
London Cards No.2 | 318.99 | 1.48 | 46.26 | 91.63 | 0.00 | 0.71 |
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 | 1.76 | 1.83 | 6.00 | 12.02 | 12.05 | 8.00 | 46.32 | 47.33 | 30.00 | |||||||||||
Gracechurch | 2.88 | 2.92 | 7.50 | 15.58 | 15.28 | 13.50 | 29.76 | 30.15 | 15.00 | |||||||||||
Oban Cards | 20.48 | 16.20 | 20.00 | 34.61 | 32.75 | 32.00 | 15.31 | 15.75 | 12.00 | |||||||||||
Penarth | 2.44 | 2.90 | 6.50 | 16.21 | 17.16 | 13.50 | 33.21 | 34.79 | 17.00 | |||||||||||
London Cards No.2 | 0.00 | 0.00 | 17.00 | 26.80 | 41.19 | 24.00 | 5.50 | 85.75 | 25.00 | |||||||||||
*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
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/>Chart 6
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Chart 8
Continental Europe ABS Credit Card Focus
Chart 9
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Table 6
Issuers versus the index - June 2024 | ||||||
---|---|---|---|---|---|---|
Trust | Outstanding amount (mil. €) | Trust as percentage of index (%) | Yield rate (%) | Payment rate (%) | Charge-off rate (%) | Total delinquency rate (%) |
EMEA Index | 2,709.0 | 16.02 | 25.90 | 3.25 | 1.92 | |
Gingko | 751.3 | 27.73 | 9.79 | 4.35 | 5.71 | 3.07 |
MCCP | 424.8 | 15.68 | 1.27 | 5.59 | 0.98 | 0.27 |
Columbus | 653.8 | 24.13 | 19.56 | 6.45 | 6.16 | 2.66 |
Swiss Cards | 879.2 | 32.45 | 25.84 | 68.59 | 0.09 | 1.17 |
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 | 6.6 | 6.8 | 9.0 | 19.1 | 19.8 | 18.0 | 6.5 | 6.4 | 3.4 | |||||||||||
Gingko | 5.4 | 6.2 | 7.8 | 9.2 | 9.7 | 7.8 | 4.7 | 4.5 | 2.0 | |||||||||||
MCCP | 1.1 | 1.1 | 7.5 | 4.5 | 1.3 | 13.5 | 5.7 | 5.7 | 2.0 | |||||||||||
Swiss Cards | 0.1 | 0.1 | 3.4 | 28.0 | 28.0 | 10.0 | 81.1 | 81.3 | 35.0 | |||||||||||
*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?
A transaction is included as of its closing date as we do not expect its performance to change materially due to the receivables' short-term nature. The transactions do not change as of the closing date because the index is current balance-weighted and the transactions are revolving master trusts. We have differentiated between the European and U.K. transactions, given their different regulatory regimes, currency denominations, and other characteristics.
What is the data source?
We compile data from investor reports based on each transaction's definition of arrears and defaults.
Is the index loan count or "dollar" weighted?
We calculate the index as the receivables' current balance in each arrear's status, divided by each transaction's current balance. Non-euro-denominated transactions are converted to euro-denominated.
When a transaction redeems, how does it affect the index? Does it affect the previous quarter(s)?
When a transaction redeems, it does not contribute to the index beyond that point and does not affect reported values for previous quarter(s).
When do we cut off the index for a given quarter?
The cut off is based 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 previous 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
Charge-offs are 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
The payment rate is 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
Yield is the 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 benefits the transaction, as it means a higher income to offset any losses and pay interest on the notes.
Net spread
Net spread is the three-month average yield rate minus the three-month average charge-off rate.
Related Criteria And Research
- Credit Conditions Europe Q3 2024: Keep Calm, Carry On, June 25, 2024
- U.K. Economic Outlook Q3 2024: A Cooling Labor Market Paves The Way For Rate Cuts, June 24, 2024
- Economic Outlook Eurozone Q3 2024: Growth Returns, Rates Fall, June 24, 2024
- European Structured Finance Outlook 2024, Jan. 9, 2024
- Delamare Cards MTN Issuer’s Series 2023-2 Credit Card ABS Notes Assigned Ratings, Oct. 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
- 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 Contact: | Doug Paterson, London + 44 20 7176 5521; doug.paterson@spglobal.com |
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