UK credit card indices show signs of stabilisation, says Moody’s

Moody’s Investors Service’s UK credit card indices exhibited signs of stabilisation in June, after a two-year period of deterioration.

The Moody’s report, entitled “UK Credit Card Indices: June 2007”, notes that both gross yield and payment rates were higher than those seen in June 2006, while there was a reduction in the growth of charge-off and delinquency levels. According to the report, the reduced growth in charge-off and delinquency rates may in part be attributed to a slow-down in personal bankruptcy and IVA filings. Another factor could be that many of the issuers within the UK credit card industry have pro-actively
implemented operational measures to reduce the number of delinquencies and defaults.

“Volatility in gross yield appeared to moderate in June 2007,” said Cher Chua, a Moody’s analyst and co-author of the report. “The index gross yield of 19.83% in June 2007 was a marginal 9 bps higher than in June 2006. The 12-month rolling average of 19.58% in June 2007 and 19.53% in June 2006 also showed a small differential.”

The report notes that payment rates were buoyant in June 2007, 132 bps higher than in June 2006, at 16.91%. The 12-month rolling average also showed considerable improvement, 16.31% compared with 15.75% in June 2006, an increase of 56 bps.