Credit Cards To Weather Further Deterioration In Asset Quality.Business Editors NEW YORK--(BUSINESS WIRE)--March 1, 2001 The modest decline in asset quality experienced during the fourth quarter of 2000 is likely to be a prelude prelude (prā`l  d), musical composition of no universal style, usually for the keyboard. It was originally used to precede a ceremony and later a second, often larger piece. to higher loss rates for 2001. The biggest impact of this will be seasoning of existing receivables, with the highest increase of net chargeoffs expected for the nonprime/subprime borrower base. With a slowing U.S. economy, the level of net chargeoffs are anticipated to be up throughout 2001. Notwithstanding, Fitch fitch: see polecat. believes specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. credit card lenders should continue to report solid profitability based on historically relatively strong asset quality, effective cross-selling of fee-based products and services, more active account management, and in some cases an increased risk appetite. `While declining asset quality is a concern, the decline in interest rates should have an indirect positive benefit on asset quality, as many borrowers may look to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. their mortgages in an effort to consolidate their debt. Another contributing factor is that increased fee income has helped keep most credit companies risk-adjusted revenue margins at historically high levels which will help offset the expected increase in chargeoffs that will inevitably occur once the economy softens,' said Thomas Abruzzo, a Senior Director in the Financial Institutions Group. Cards in 2001 Abruzzo notes that the high-end borrower base, know as the `superprime' segment could become even more competitive throughout the year as issuers like Capital One Financial Corp. (Capital One) have already hit the market with very attractive low-interest rate offers. Declines in rates may make the economics of this customer segment even more attractive to lenders than it was a year ago when rates were higher. The report also points to increased consolidation with many of the specialty credit card lenders remaining active purchasers, including MBNA MBNA Monument Builders of North America MBNA Mercedes-Benz North America MBNA Maryland Bank, National Association MBNA Maryland Bank North America MBNA Mount Baker Nurses Association (Bellingham, Washington) Corp. (MBNA) and Providian Financial Corp. (Providian). American Express American Express (NYSE: AXP), sometimes known as "AmEx" or "Amex", is a diversified global financial services company, headquartered in New York City. The company is best known for its credit card, charge card and traveler's cheque businesses. Co. (AXP The brand name Digital gave to its first family of Alpha-based computers. In 1998, Digital was acquired by Compaq. See Alpha. ) has also shown some interest in the MasterCard/Visa portfolios of regional banks, and competition for quality credit card portfolios should remain intense, with Citigroup and JP Morgan Chase also remaining active bidders. The Rating Outlook Fitch remains comfortable with the rating levels of the major credit card companies, and at this point in time the rating outlooks for these issuers is stable. At the high- end of the rating spectrum is AXP, which maintains a long- term rating of `AA-'. At the lower-end of the ratings spectrum is Metris Companies, which is rated `BB'. Fitch also remains comfortable with the ratings for MBNA `A-', Capital One `BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. +', and Providian `BBB'. For a copy of the report `Credit Card Banks 2000: Review and Outlook', please visit `www.fitchratings.com' or contact market services at 1-800-853-4824. |
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