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Fitch Ratings: Canadian Credit Card ABS Performance Continues Strong Trends

· 02/05/2021 15:19
Fitch Ratings: Canadian Credit Card ABS Performance Continues Strong Trends

(The following statement was released by the rating agency)

Related Fitch Ratings Content: Canadian Credit Card Index - Fourth-Quarter 2020

Fitch Ratings-Toronto-05 February 2021: Canadian credit card asset-backed securities (ABS) performance improved through 4Q20, and reached historical highs for monthly payment rate (MPR) and lows for charge-offs, according to Fitch Ratings in its latest Canadian credit card ABS index report. However, Fitch expects delinquencies and charge-offs to potentially rise from current levels as payment relief measures have helped partially suppress weaker performance to date. Canada's economic recovery slowed in 4Q20, impacted by the surge in daily COVID-19 cases requiring further government measures to be put in place. However, preliminary estimates for December 2020 from Statistics Canada indicated the economy grew by 1.9% for the quarter despite the restrictions in place and an increase in unemployment during the final month of the quarter. Retails sales were also stronger than expected in November 2020, with the highest MoM growth rate since September. However new restrictions introduced in many regions of the country, including lockdowns, likely resulted in a decline in retail sales at YE as indicated by Statistics Canada. High housedhold debt concerns returned with an increase in the household debt-to-income 170.7% at the end of 3Q20, from 162.8% the prior quarter. However, the stress on household finances from the pandemic has yet to be seen as the savings rate has remained elevated, and insolvency volumes remained below the prior year levels. Even so, with loan payment deferrals now expired and elevated unemployment compared to pre-pandemic levels, consumers are expected see pressure. This is especially so given the higher number of daily COVID-19 cases and slow rollout of the vaccination program due to delivery delays, all of which will impact the pace of the overall economic recovery. Fitch's Canadian credit card ABS Index contains the following trusts: --Canadian Credit Card Trust II; --CARDS II Trust; --Eagle Credit Card Trust; --Evergreen Credit Card Trust; --Glacier Credit Card Trust; --Golden Credit Card Trust; --Master Credit Card Trust II. Contact: Michael Girard Director +1-416-644-6579 Fitch Ratings, Inc. 120 Adelaide Street West, Suite 2500 Toronto, ON M5H 1T1 Jordyn Auge Senior Analyst +1-646-582-3428 Herman C. Poon Senior Director +1-212-908-0847


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