Rating agency Moody’s reported Monday that while spread in the credit card industry remains good, collateral performance will likely get worse before it gets better. The report examines credit card charge-offs and delinquencies with an eye on rating securities backed by bank’s card portfolios.
According to figures tracked by Moody’s Credit Card Indices, spread — the difference between revenues and expenses for a securitized transaction — remains high from a historical perspective.
In May, the excess spread index was 7.09 percent. According to Moody’s, excess spread at this level means that “most trusts are positioned to absorb substantial further deterioration in collateral performance before hitting a performance-based early amortization event. Charge-off rates could theoretically double on an average transaction from where they are today before causing an early amortization event.”
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