Moody's Investors Service reported in its UK Credit Card Index Report for September that the ABS sector will witness a deterioration over the next coming months despite relatively stable credit card indicators.
"In light of the recent increase in delinquencies, Moody's expects a further rise in delinquencies and subsequent charge-offs over the coming months, albeit the magnitude of the increase is difficult to predict" said Elise Lucotte and Virginie Marraud des Grottes, analysts at Moody's and co-authors of the report. Moody's further noted a significant increase in insolvencies.
They go on to point out: "Given these industry forecasts, it is still to be seen whether the originators will be able to avoid a deterioration in performance in their trusts." Customers' future behaviour in the current environment remains uncertain.
Moody's continues to have a negative outlook on the UK credit card sector. This view is primarily driven by the UK economy being within a whisker of a technical recession, increasing costs of living, decreased availability of credit and highly leveraged borrowers. Moody's is closely monitoring the performance of each UK trust, speaking regularly to originators and requesting additional data in order to better understand the potential performance of each portfolio.