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Announcement:

Moody's: US credit card delinquencies reach record low in December, suggesting further decline in charge-offs

20 Jan 2012

New York, January 20, 2012 -- US credit card charge-offs declined by 34 basis points in December to 5.04%, according to Moody's Credit Card Indices. Also during December delinquencies fell to new record lows, pointing to further declines in charge-offs in the months ahead.

Moody's expects the charge-off rate to continue to fall well into the coming year, eventually moving to below 4% by the end of 2012.

"We expect improvement in credit card performance to continue into 2012, although, the rate of improvement in performance will slow as the year goes on" says Jeffrey Hibbs, a Moody's Assistant Vice President and Analyst.

By falling to 5.04%, the charge-off rate finished the year three percentage points lower than its 8.03% level at year-end 2010. The drop in 2011 was the sharpest calendar year decline in the history of Moody's Credit Card Indices.

The charge-off rate measures those credit card account balances written off as uncollectible as an annualized percentage of total outstanding principal balance.

With each of the "Big Six" credit card trusts posting monthly declines, the delinquency rate fell to an all-time low of 2.91% in December. Early-stage delinquencies also showed improvement, falling to 0.80% during the month.

Moody's says December is a seasonally strong month for delinquencies, as holiday shopping drives up balances, lowering the share of these balances on which consumers are delinquent. Moody's expects delinquencies to post a slight seasonal increase in January, as higher credit quality obligors pay down their holiday credit card spending, which leaves outstanding a pool of receivables from overall weaker credit quality obligors. Despite this expected seasonal uptick next month, delinquencies have declined substantially over the past year and are now at an historically low level.

The delinquency rate measures the proportion of account balances for which a monthly payment is more than 30 days late as a percent of total outstanding principal balance. The early-stage delinquency rate measures the proportion of account balances for which a monthly payment is between 30-59 days late as a percent of total outstanding principal balance.

After four consecutive months of decline, the payment rate index increased in December, rising to 21.58%, just 33 basis points below the all-time high it set in August 2011.

The payment rate measures the average amount of principal that cardholders repay each month, as a percentage of total outstanding principal balance.

The yield index declined slightly in December to 19.13%, more than two percentage points below its 2010 year-end level, due to the lower boost from principal receivables discounting.

Yield is the annualized percentage of income, primarily finance charges and fees, collected during the month as a percent of total loans.

Lower charge-offs more than offset the decline in yield, leading to 27 basis point increase in the excess spread index to 11.30%, keeping it near its all-time high.

Excess spread is a measure of the overall performance of securitized pools of credit card receivables.

Moody's January Credit Card Indices report titled "Moody's: Credit Card Delinquencies Reach Record Low in December," is available on www.moodys.com.

***

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Jeffrey Hibbs
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Luisa De Gaetano
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
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JOURNALISTS: 212-553-0376
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Moody's: US credit card delinquencies reach record low in December, suggesting further decline in charge-offs
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