DBRS Morningstar Comments on Performance of Canadian Credit Cards in Q3 2019

DBRS Limited (DBRS Morningstar) published the Canadian Credit Card Performance Index (the Index) for Q3 2019. The Index is now available in Excel format as well as in the regular PDF. All key performance metrics tracked by DBRS Morningstar remained stable over the last quarter.

The payment rate averaged 46.6% over Q3 2019, up from 45.9% in the previous quarter and up from 45.6% in Q3 2018.

Gross yield averaged 23.7% in Q3 2019, in line with the previous quarter and slightly above an average of 23.4% a year ago.

Although losses were slightly above the 2.8% average from the previous year, the losses remained low across all issuers, averaging 3.1% in Q3 2019, which was also in line with the previous quarter. Low losses continued to result in a high weighted-average (WA) excess spread of 17.6% for Q3 2019. The available excess spread continued to provide significant credit protection to the noteholders of credit card securitizations.

The WA delinquencies of 90+ days of 71 basis points (bps) in September 2019 was relatively in line with 70 bps in September 2018.

Canadian credit card receivables in the custodial pools continued to perform well.

The majority of household credit continues to be provided by chartered banks, which account for 84.0% of total household credit outstanding. The use of securitization by chartered banks to fund credit card receivables remains high, with the excellent credit quality in Canadian credit card portfolios driving demand. Issuance south of the border continued to increase through Q3 2019. During the quarter, the market saw a total of three issuances: one each from Eagle Credit Card Trust (Eagle), Master Credit Card Trust II, and Evergreen Credit Card Trust. The total combined issuance amounted to $1.5 billion, out of which 83.5% was denominated in U.S. dollars. The notes issued by Eagle were placed in Canada, amounting to $250 million.

Credit card notes continued to dominate the overall Canadian securitization market (excluding private placements), accounting for 38.4% of the total outstanding at the end of Q3 2019, compared with 37.5% in the previous quarter.

The Index is published quarterly and provides data on key performance metrics, including gross yield, loss rate, payment rate, delinquencies, and excess spread. To be consistent with other metrics, excess spread is also reported at the issuer level, taking into consideration the WA cost of funds and expenses of all outstanding series. All securitization transactions rated by DBRS Morningstar that are funded either in the asset-backed securities or the asset-backed commercial paper markets are included in the calculation of industry averages, as well as transactions not rated by DBRS Morningstar to the extent that performance data is available to the public. These averages are dollar-weighted and are based on the receivables balance of custodial pools at the end of each reporting period, except for excess spread, which is dollar-weighted by the debt outstanding. 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 way eligible receivables are selected for securitizations.

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

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada