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Credit card industry analysts this week expressed cautious optimism about credit card securitization as the pace of deals backed by credit card loans increases and some positive effects are seen from the Federal Reserve's Term Asset-Backed Securities Loan Facility. JPMorgan Chase & Co. last week sold $1 billion of bonds backed by credit card loans, signaling improved investor appetite for credit card loan-backed deals. That deal was executed without TALF funding, observers say. Earlier this month Chase separately sold a $5 billion TALF-eligible credit card loan-backed deal. The Federal Reserve in March began to make TALF funds to investors buying securities backed by consumer loans to jump-start lending (CardLine, 3/20). "Credit card issuers are probably heartened to see that the market for securitized deals is warming up again, and credit card-backed deals are getting relatively more interest than some other lending sectors," Dan Nigro, asset-backed securities portfolio manager for New York-based Dynamic Credit Partners, tells CardLine. He notes that securitized deals across all consumer borrowing sectors slowed to a trickle earlier this year, choking off a prime source of liquidity lenders need to fund new loans. But Sanjay Sakhrani, an analyst with the New York-based securities investment firm Keefe, Bruyette & Woods, tells CardLine it is too early for card issuers to exhale. For one thing, the pace of credit card securitized deals is still sluggish, and "not a lot" of credit card issuers are structuring securitized deals for TALF funds, Sakhrani says. And the deals don't come cheaply. "The cost to execute a credit card securitized deal is still pretty high for non-TALF deals," he says. "TALF might help issuers get more securitized deals sold, but we still have a long ways to go. Most large card issuers are still showing a preference for funding card loans through consumer deposits," Sakhrani says. The Fed, which has committed up to $1 trillion in TALF funds across all sectors, received $10.9 billion in loan requests under the program so far this month compared with $1.7 billion in April.
