Credit Card Performance Improves Absent Banc One Change, Fitch Says.

Business Editors

NEW YORK--(BUSINESS WIRE)--July 14, 2000

U.S. consumer credit quality exhibited renewed improvement last month according to the latest Fitch Credit Card Performance Indexes. June results show fewer domestic cardholders defaulting and falling seriously past due than for any one month in four years. In addition, the indexes indicate card portfolios remain highly profitable for issuers even as cardholders repay outstanding balances at historically high rates.

The June index results cover the May collection period and have been adjusted in consideration of an accounting change at Banc One. The one-time accounting change was implemented to bring all of Banc One's credit card portfolios into compliance with certain FFIEC guidelines regarding deceased and bankrupt cardholders and resulted in overstated chargeoffs and understated excess spread for each of its master trusts - First USA, First Chicago, Bank One, Chevy Chase, and First Commerce. Absent the adjustment, Fitch's chargeoff and excess spread indexes each would have worsened by approximately 60 basis points.

For the month, Fitch's chargeoff index declined 17 bps from May to 5.20%, its lowest level since Sept. 1996. In advancing its string of consecutive year-over-year improvements to 23 consecutive months, June's level significantly bettered the year-earlier mark of 5.95%. The improvement was evenly distributed with half of all master trusts tracked reporting lower versus higher chargeoffs for the month. Master trusts registering the largest one-month chargeoff declines included Capital One, Universal Card, and First Chicago (when adjusted for the accounting change).

Seriously late payments on card portfolios fell to their lowest level in four years as well as Fitch's delinquency index, which tracks balances greater than 60 days past due, dropped to 2.79% from May's 2.89%. The level is the indexes lowest since June 1996.

As expected, monthly payment rates and portfolio yields rebounded from their seasonal dips in the prior month, with the MPR index gaining 118 bps to register 16.65%. The MPR index tracks total payments made by cardholders each month and continues to exhibit the health of U.S. consumers and shifting card usage patterns. Meanwhile, Fitch's portfolio yield index rose 96 bps to 19.40% yet fell short of its year earlier 19.71% mark.

Excess spread, a key measure of card portfolio health and credit card-backed security strength, widened to 5.84% from 15.47% last month. The current level is the index's highest since Jan. although slightly below June 1999's 6.04%.

Fitch's indexes are compiled by calculating the weighted average annualized gross yield, total monthly payment rate, principal chargeoff rate, and three-month excess spread for the top general purpose, private label, and retail credit card issuers. The indexes track the performance of more than $300 billion in credit card receivables backing more than $211 billion in credit card asset-backed securities.

The indexes are available on Fitch's web site at `www.fitchratings.com' and in Credit Card Movers & Shakers, which is expected to be published next week.

Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance Markets worldwide.