Credit Commentary

Discover Card Master Trust I: Performance Review

By Zarana on Friday, May 29 2009

Discover Card Master Trust I owned by Discover Financial Services (NYSE: DFS) on May 15, 2009 reported a $303 million yield in month of April 2009, a decline of 18% from the April 2008.

End of the period total credit card receivables for the month increased $1,024 million, or 3.0%, from the April of 2008, and month-end receivables increased $132 million, or 0.4%, from previous period. On the other hand, principal collections of April’09 have decreased significantly by 10% from previous year and by 9% from previous month. As a result, the payment rate of the month was 16% which was 18.1% a year ago.

Moreover, net write-offs in the month were $171 million which were $146 million in month of April, 2008. That is 17% of YOY increase. Additionally, Delinquencies have increased due to the credit crunch in the market. Delinquencies for one cycle were $2,150 in April’09, an increase of 39% from April’08.

However, despite the weak economy weighing on consumers, Fitch Ratings' credit card portfolio review indicates that the vast majority of credit card asset backed security (ABS) classes remain well insulated from loss. The robust credit card structures combined with bank efforts to actively manage risk and in some cases increase transaction level credit enhancement have resulted in Fitch affirming 467, or 98% of its credit card ABS ratings including all 'AAAs'.