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- Table of Contents
- U.K. ABS Credit Card Focus
- Continental Europe ABS Credit Card Focus
- Summary Of Methodology For Our European And U.K. Credit Card ABS Index
- Glossary
- Related Criteria And Research
- Despite challenging macroeconomic conditions in 2023, the credit performance of our rated credit card ABS transactions remained mainly unchanged in Q4 2023 year-on-year. Nominal delinquencies decreased marginally and defaults remained low and within our expectations.
- Charge-offs decreased slightly to 3.1% from 3.3% in our U.K. credit card ABS index quarter-on-quarter, while they also decreased to 2.7% from 3.2% in our European credit card ABS index. The U.K. index decrease is due to the normalization of the charge-off rate for Oban Cards 2021-1 PLC, after its Q3 2023 spike.
- Delinquencies remained relatively unchanged quarter-on-quarter, with total delinquencies remaining stable in Europe, while increasing by 0.1% in in our U.K. credit card ABS index. Furthermore, 90+ day delinquencies were stable across both indices.
- Payment rates decreased by 0.5% in our U.K. credit card ABS index quarter-on-quarter and decreased by 0.1% 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 13.2% from 12.4%. Again, this is due to the normalization of the charge-off rate for Oban Cards 2021-1 PLC. In our Europeancredit card ABS index, net spread also increased quarter-on-quarter to 15.8% from 14.3%.
- We rated Delamare Cards MTN Issuer PLC's asset-backed floating-rate series 2023-2 class A1 and A2 notes (the class A notes) in Q4 2023. At the same time, we affirmed our 'AAA (sf)' ratings on the series 2023-1 class A1, A2, and A3 notes, and the series 2020-1 class A1 and A2 notes. Delamare Cards MTN Issuer is a delinked master trust structure.
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 (%) | Q4 2023 | Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | Q2 2022 | |||||||||
| Total delinquency rate* | 1.38 | 1.3 | 1.4 | 1.4 | 1.4 | 1.4 | 1.5 | |||||||||
| Charge-off rate* | 2.65 | 3.2 | 2.9 | 2.9 | 3.0 | 2.9 | 3.1 | |||||||||
| Payment rate* | 32.65 | 33.2 | 33.1 | 32.9 | 32.6 | 33.1 | 32.3 | |||||||||
| Yield rate* | 15.83 | 15.6 | 15.0 | 15.6 | 15.7 | 15.1 | 14.5 | |||||||||
| Net spread* | 13.18 | 12.4 | 12.2 | 12.7 | 12.7 | 12.3 | 11.4 | |||||||||
| Economic data | ||||||||||||||||
| Unemployment rate (%)§ | 4.2 | 4.2 | 4.3 | 3.80 | 3.60 | 3.70 | 3.80 | |||||||||
| Individual insolvencies§ | 24,910 | 24,418 | 25,956 | 27,432 | 29,352 | 28,946 | 32,305 | |||||||||
| Y-O-Y GDP growth§ | N.A. | 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 (%) | Q4 2023 | Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | ||||||||
| Total delinquency rate* | 1.79 | 1.8 | 1.9 | 1.8 | 1.8 | 1.7 | ||||||||
| Charge-off rate* | 3.14 | 3.3 | 1.8 | 1.6 | 2.1 | 1.4 | ||||||||
| Payment rate* | 26.68 | 26.8 | 29.1 | 26.6 | 25.2 | 25.4 | ||||||||
| Yield rate* | 18.95 | 17.7 | 17.5 | 17.1 | 16.5 | 16.8 | ||||||||
| Net spread* | 15.82 | 14.3 | 15.7 | 15.4 | 14.4 | 15.5 | ||||||||
| Economic data - EU-19 | ||||||||||||||
| Unemployment rate (%) | 6.4 | 6.5 | 6.5 | 6.6 | 6.7 | 6.7 | ||||||||
| Y-O-Y GDP growth (%) | - | 0.0 | 0.6 | 1.3 | 1.8 | 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, †State Secretariat for Economic Affairs (SECO), as of Dec. 31, 2023. Source: 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. | 0.4 | 1.5 | 1.6 | Neutral | ||||||
| France | 0.9 | 1.5 | 1.3 | Neutral | ||||||
| Spain | 1.8 | 2.0 | 2.1 | Somewhat favorable | ||||||
| Switzerland | 1.0 | 1.4 | 1.4 | Neutral | ||||||
| Unemployment rate (%) | ||||||||||
| U.K. | 4.6 | 4.3 | 4.2 | Neutral | ||||||
| France | 7.5 | 7.5 | 7.3 | Neutral | ||||||
| Spain | 12.1 | 12.0 | 11.8 | Neutral | ||||||
| Switzerland | 4.1 | 4.0 | 3.9 | Neutral | ||||||
| CPI (%) | ||||||||||
| U.K. | 3.0 | 2.2 | 2.0 | Unfavorable | ||||||
| France | 2.7 | 1.9 | 1.7 | Unfavorable | ||||||
| Spain | 3.1 | 1.9 | 1.8 | Unfavorable | ||||||
| Switzerland | 1.8 | 1.4 | 1.2 | Neutral | ||||||
| Bank of England policy rate Q4 average (%) | 4.50 | 2.75 | 2.50 | Unfavorable | ||||||
| ECB policy rate Q4 average (%) | 3.75 | 2.50 | 2.50 | Unfavorable | ||||||
| Swiss National Bank policy rate Q4 average (%) | 1.25 | 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 - December 2023 | ||||||
|---|---|---|---|---|---|---|
| Outstanding amounts (mil. £) | Trust as percentage of U.K. index (%) | Yield rate (%) | Payment rate (%) | Charge-off rate (%) | Total delinquency rate (%) | |
| U.K. index | 21,373 | 15.64 | 31.24 | 2.53 | 1.41 | |
| Delamare | 3,314 | 15.50 | 10.71 | 43.81 | 1.67 | 2.57 |
| Gracechurch | 10,023 | 46.90 | 15.46 | 27.98 | 2.70 | 0.89 |
| Penarth | 7,525 | 35.21 | 16.78 | 31.24 | 1.92 | 1.38 |
| Oban Cards | 511 | 2.39 | 34.42 | 13.87 | 13.56 | 4.58 |
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 | 1.75 | 1.86 | 6.00 | 11.57 | 11.27 | 8.00 | 46.66 | 45.15 | 30.00 | |||||||||||
| Gracechurch | 2.98 | 2.80 | 7.50 | 15.83 | 16.28 | 13.50 | 29.65 | 29.54 | 15.00 | |||||||||||
| Penarth | 2.23 | 2.13 | 6.50 | 15.63 | 15.99 | 13.50 | 32.64 | 32.48 | 17.00 | |||||||||||
| Oban Cards | 17.82 | 12.74 | 20.00 | 32.35 | 34.37 | 32.00 | 14.81 | 14.96 | 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
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Continental Europe ABS Credit Card Focus
Chart 9
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Table 6
| Issuers versus the index - December 2023 | ||||||
|---|---|---|---|---|---|---|
| Trust | Outstanding amount (mil. €) | Trust as percentage of index (%) | Yield rate (%) | Payment rate (%) | Charge-off rate (%) | Total delinquency rate (%) |
| EMEA Index | 2,729.3 | 18.95 | 26.68 | 3.14 | 1.71 | |
| Gingko | 806.9 | 29.56 | 8.87 | 4.10 | 5.05 | 2.79 |
| MCCP | 448.6 | 16.44 | 22.40 | 5.80 | 1.21 | 0.26 |
| Columbus | 642.7 | 23.55 | 19.16 | 6.25 | 6.01 | 2.33 |
| Swiss Cards | 831.1 | 30.45 | 26.72 | 75.66 | 0.11 | 0.97 |
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 | 4.0 | 6.1 | 9.0 | 18.2 | 18.5 | 18.0 | 6.5 | 6.5 | 3.4 | |||||||||||
| Ginkgo | 4.6 | 5.0 | 7.8 | 8.7 | 9.1 | 7.8 | 4.9 | 4.3 | 1.98 | |||||||||||
| MCCP | 0.9 | 1.2 | 7.5 | 14.9 | 18.1 | 13.5 | 5.6 | 5.7 | 2.0 | |||||||||||
| Swiss Cards | 0.1 | 0.1 | 3.5 | 27.6 | 28.0 | 8.0 | 80.9 | 79.2 | 32.0 | |||||||||||
| *In our analysis, we subject base-case rates to stresses, haircuts, and lagging. | ||||||||||||||||||||
Chart 11
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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?
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
- European Structured Finance Outlook 2024, Jan. 9, 2024
- Adapting To New Realities: Credit Conditions Europe Q1 2024, Nov. 28, 2023
- U.K. Economic Outlook 2024: More Stagflation Ahead, Nov. 27, 2023
- Delamare Cards MTN Issuer’s Series 2023-2 Credit Card ABS Notes Assigned Ratings, Oct. 27, 2023
- 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
- 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
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