NEW YORK-Fitch Ratings is projecting that some credit card issuers should prepare for record losses on their portfolios. Citing rising job losses and the absence of refinancing options such as low-rate balance transfers and home equity loans, Fitch said in a new report that it expects credit metrics will continue to deteriorate in the fourth quarter of 2008 and into 2009, "with some issuers surpassing historical loss peaks before 2009 is over."
"A turn in the cycle will be heavily dependent upon the duration of an economic downturn and the severity of the increase in the unemployment rate," Fitch said, adding that recently announced government-led intervention programs are expected to ease the funding strain for some large card issuers, but lenders are expected to remain cautious on portfolio growth in 2008 and 2009,
Competition for deposits is expected to intensify as many financial institutions attempt to shore-up cheaper sources of liquidity.
Fitch said it anticipates rating pressure will mount over the remainder of 2008 and into 2009 as economic headwinds negatively impact consumer credit. Declines in profitability which are not offset by enhanced liquidity and capitalization could prompt negative rating actions.For info: www.fitchratings.com.
