DBRS Publishes Q2 2010 Canadian Credit Card Performance Index

DBRS has today published the Q2 2010 Canadian Credit Card Performance Index, dating from January 2000. The index is published quarterly and provides data on key performance metrics, including gross yield, loss rate, payment rate and excess spread. To be consistent with other metrics, excess spread is also reported at the issuer level, taking into consideration the weighted-average cost of funds and expenses of all outstanding series.

The Canadian credit card industry continued to show improvement over the past quarter with respect to the loss rate, monthly payment rate, gross yield and excess spread. For example, the average loss rate decreased to 5.82% as of June 30, 2010, the second consecutive month below 6% over the past 12 months. The last time the average loss rate was below 6% was in April 2009. Loss rates among issuers remained divergent, ranging from 3.48% to as high as 11.38%.

The average monthly payment rate remained high at 32.30% at the end of June, slightly better than the 32.08% at the end of the first quarter. The difference in payment rates among issuers continued to be large, ranging from 9.73% to 50.25%. Average gross yield at the end of June was 21.45%, again slightly higher than at the end of the first quarter. Average excess spread remained resilient and reached a historical peak of 10.41% at the end of June. Excess spread continued to show a large gap among issuers, ranging from 5.35% to 12.84%.

All securitization transactions rated by DBRS and funded either in the term or commercial paper markets are included in the calculation of industry averages. These averages are dollar-weighted and based on the receivables balance of custodial pools at the end of each reporting period. As such, these metrics are monthly results. The custodial pool is generally a subset of an issuer’s managed portfolio, depending on the mix of the issuer’s receivables and the matter in which eligible receivables are selected for securitizations. As at June 30, 2010, the aggregate custodial pool stood at $45.0 billion, almost unchanged from March 31, 2010. The outstanding debt balance also remained nearly unchanged from the end of the first quarter at $22.3 billion, with the $2.4 billion of new issuance being offset by a similar volume of note repayment during the quarter.

In order to provide investors timely and insightful analysis, DBRS monitors each class of all credit card transactions on a monthly basis, focusing on the key performance metrics of securitization portfolios in recent months and, if appropriate, revising base-case assumptions and performing stress testing under various scenarios.

Copies of the index are available at www.dbrs.com or by contacting us at info@dbrs.com.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is DBRS Criteria for Canadian Credit Card Securitization, which can be found on our website under Methodologies.

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