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Banking industry

Credit Card ABS Issuance Expected to Remain Low Amid Strong Bank Lending

Strategic Insights

— 2 min read

As banks experience ample funding through deposit growth and subordinated debt issuance, the appeal of securitization for credit card lending is waning. This shift has led to a decline in the issuance of credit card asset-backed securities (ABS). Wells Fargo Securities forecasts a "lackluster" issuance of credit card ABS, citing the significant decrease in the amount of credit card ABS issued in 2015.

Just $27.3 billion of credit card ABS was issued in 2015, down from $44.6 billion in 2014, according to Wells Fargo. The firm expects issuance to remain relatively low in 2016, with estimates suggesting a total of $30 billion. This decline is expected to further exacerbate liquidity issues in the secondary market for these securities.

Key Takeaways:

  • Credit card ABS issuance has decreased significantly, with $27.3 billion issued in 2015, down from $44.6 billion in 2014, according to Wells Fargo Securities.
  • The firm forecasts "lackluster" issuance of credit card ABS, with estimates suggesting a total of $30 billion in 2016.
  • Regulatory changes have made it more attractive for banks to fund lending with subordinated debt, reducing the appeal of securitization.
  • Bank of America has removed $3 billion of receivables from its credit card securitization trust, which still has $14.8 billion in outstanding ABS notes, according to Moody's Investors Service.
  • The trust's seller's interest remains the highest of all trusts at 60.6%, according to Wells Fargo, which will help mitigate potential credit risk.
  • Credit card receivables performance has been strong, with year-over-year improvements in charge-off rates, delinquency rates, and monthly payment rates.

Statistics:

  • $27.3 billion was the total amount of credit card ABS issued in 2015, a decline from $44.6 billion in 2014.
  • $30 billion is the estimated total amount of credit card ABS issuance in 2016, according to Wells Fargo Securities.
  • The Bank of America credit card securitization trust removed $3 billion of receivables in 2015, with $570 million removed in December and $2.1 billion removed in November.
  • The trust's seller's interest is 60.6%, the highest among all trusts.
  • The December 2015 charge-off rate index was 2.11%, down from 2.35% in December 2014.
  • The percentage of assets more than 60 days delinquent was 1.07% in December 2015, down from 1.19% in December 2014.
  • The December 2015 monthly payment rate was 23.7%, up from 22.32% in December 2014.

Sources:

  • Wells Fargo Securities
  • Moody's Investors Service
  • Wells Fargo Securities Credit Card Indexes
  • Bank of America

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