One of our favorite publications, Grant’s Interest Rate Observer, had an interesting article a few months ago where it discussed the potential turn of the credit cycle. Most publications refer to Fed data or charge off information disclosed in quarterly or annual SEC filings by financial institutions, but there is MONTHLY information available which is disclosed by credit card securitizations available to investors.
We have highlighted some public data below:
IR Fixed income info page: https://www.jpmorganchase.com/corporate/investor-relations/fixed-income.htm
Scrolled down for credit cards securitizations: https://www.jpmorgan.com/country/IN/en/jpmc/ir/financial/abs/cc
The first securitization shown is “Chase Issuance Trust”. The most recent report is January 2017.
Discover Credit Card ABS Reporting Website: https://investorrelations.discover.com/investor-relations/debt-investor-info/discover-credit-card-abs-reporting/default.aspx
“Discover Card Securitization Program Summary Data” for NCO, delinquencies, spread data: View the most recent report.
“American Express Credit Account Master Trust”: http://ir.americanexpress.com/Credit-Account-Master-Trust/Index?KeyGenPage=208667
Jan. 2017 10-D filing: http://ir.americanexpress.com/Cache/1500095922.PDF?O=PDF&T=&Y=&D=&FID=1500095922&iid=102700
- Capital One Securitized Products Information: http://phx.corporate-ir.net/phoenix.zhtml?c=70667&p=irol-absindex
- Capital One Multi-Asset Execution Trust: Trust Performance Analysis” gives you a pdf with important information from the filing.
- TRUST DATA: MONTHLY TRUST FINANCIALS: http://www.citigroup.com/citi/fixedincome/cccs_mtf.htm
Below is chargeoff information commonly referred to which is provided by the Fed, provided for reference.
The second-derivative of charge off rates is positive, as seen in the graph below (this article was written with data up to April 1st, 2016, but these graphs will update as new data comes in):
The Grant’s article mentioned that subprime autoloan delinquencies were up 13% yoy in September to 5.05%, these losses are due in part to lower resale values and lax underwriting standards. Additionally, the charge off rates for consumer loans potentially are at an inflection point as well, even with the last two years of lower gas prices benefitting the consumer:
Finally, banks generally do not appear to be well reserved for increased credit losses:
The new Fed data which comes in is almost a year old, so monitoring monthly consumer chargeoff rates, especially when a new trend in chargeoff rates is potentially emerging, can be very powerful and informative.
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