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European And U.K. Credit Card ABS Index Report Q2 2021

Capital Markets View - October 2021

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Weekly European CLO Update

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SF Credit Brief: CLO Insights 2021 U.S. BSL Index: Credit Metrics Continue To Improve As Upgrades Begin

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Servicer Evaluation: Selene Finance L.P.


European And U.K. Credit Card ABS Index Report Q2 2021

Table 1

Key Performance Indicators: U.K.
Index (%) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020
Total delinquency rate* 1.8 2.0 1.8 1.8 2.2
Charge-off rate* 3.6 3.5 3.5 3.7 3.6
Payment rate* 27.1 25.1 25.3 22.9 19.3
Yield rate* 21.0 22.0 22.1 20.3 13.9
Net spread* 17.4 18.5 18.6 16.7 10.3
Economic data
Unemployment rate (%)§ 4.8 4.9 5.1 4.8 4.2
Individual insolvencies§ 28,206 26,093 30,895 21,150 32,498
Y-O-Y GDP growth§ 22.2 (6.10) (7.30) (8.50) (21.40)
*The quarterly performance data reflects the three-month average performance during the quarter, rather than the value as of quarter-end. For example, the data for first quarter reflects the average performance for January, February, and March, rather than the value for March alone. §Office for National Statistics, England, and Wales, not seasonally adjusted. Y-O-Y--Year on year. Source: S&P Global Ratings.

Table 2

Key Performance Indicators: Continental Europe
Index (%)* Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020
Total delinquency rate 1.2 1.5 1.7 1.8 2.3
Charge-off rate 1.5 3.2 2.4 3.6 3.0
Payment rate 23.3 22.4 23.0 21.2 20.2
Yield rate 16.9 17.1 17.0 16.4 17.0
Net spread 15.0 14.1 14.0 14.6 14.1
Unemployment rate (%)
France§ 7.0 8.3 8.0 8.7 6.7
Spain§ 15.3 16.0 16.1 16.3 15.3
Switzerland† 6.1 6.1 5.1 4.1 4.1
Y-O-Y GDP growth
France§ 18.7 1.7 (4.2) (3.6) (18.7)
Spain§ 19.8 (4.2) (8.9) (8.6) (21.6)
Switzerland† (1.6) (1.4) (7.8) (0.7) 1.6
*The quarterly performance data reflects the three-month average performance during the quarter, rather than the value as of quarter-end. For example, the data for first quarter reflects the average performance for January, February, and March, rather than the value for March alone. Sources: §ECB/Eurostat, †State Secretariat for Economic Affairs (SECO), as of Aug 30. S&P Global Ratings. Y-O-Y--Year on year. N.A.--Not available.

Table 3

Scenarios For U.K. And European Credit Card ABS Collateral
Actual Forecast
2020 2021F 2022F 2023F 2024F Baseline effect on collateral credit quality
Real GDP (%) change
U.K. (9.8) 7.0 5.2 1.9 1.6 Favorable
France (8.0) 5,6 4.2 2.0 1.7 Favorable
Spain (10.8) 6.3 6.4 2.9 2.3 Favorable
Switzerland (3.0) 3.5 3.1 1.7 1.7 Favorable
Unemployment rate (%)
U.K. 4.5 5.1 4.8 4.1 4.0 Unfavorable
France 8.1 8.4 8.7 8.3 7.8 Unfavorable
Spain 15.6 15.8 15.0 14.5 14.0 Unfavorable
Switzerland 4.8 4.9 4.8 4.6 4.4 Somewhat Unfavorable
U.K. CPI inflation (%) 0.9 1.7 1.9 1.7 1.7 Somewhat Unfavorable
Bank of England policy rate Q4 average (%) 0.10 0.10 0.10 0.20 0.42 Somewhat Favorable
ECB policy rate Q4 average (%) 0.00 0.00 0.00 0.00 0.00 Somewhat Favorable
Swiss National Bank policy rate Q4 average (%) (0.75) (0.75) (0.75) (0.75) (0.5) Somewhat Favorable
CPI--Consumer price index. Sources: Oxford Economics, S&P Global Ratings.

U.K. ABS Credit Card Focus

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Table 4

Issuers Versus The Index - June 2021
Outstanding amounts (million £) Trust as percentage of U.K. index (%) Yield rate (%) Payment rate (%) Charge-off rate (%) Total delinquency rate (%)
UK Index 18,115 22.6 29.7 3.6 1.8
Delamare 3,068 16.9 11.0 40.7 1.3 2.8
Gracechurch 8,238 45.5 33.1 27.1 4.2 1.5
Penarth 6,281 34.7 13.7 29.0 3.1 1.3
Oban Cards 528 2.9 31.7 14.9 10.9 5.4

Table 5

Performance Against Base-Case Assumptions
Charge-off rate (%) Yield rate (%) Payment rate (%)
Trust 12-month average Three-month average Base case* 12-month average Three-month average Base case* 12-month average Three-month average Base case*
Delamare 2.4 1.9 6.0 11.7 11.3 8.0 35.9 39.5 25.0
Gracechurch 4.3 4.2 7.5 28.7 29.7 13.5 21.5 23.7 15.0
Penarth 2.7 2.8 6.5 14.8 13.3 13.5 25.8 26.6 17.0
Oban Cards N/A 11.3 20.0 N/A 31.4 32.0 N/A 15.0 12.0
*In our analysis, we subject base case rates to stresses, haircuts, and lagging. For the yield rate, these values cannot be directly compared with our base-case assumptions because they include interchange, which we do not give credit for in our analysis. N/A--Not applicable.

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Continental Europe ABS Credit Card Focus

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Table 6

Issuers Versus The Index - June 2021
Trust Outstanding amount (mil. €) Trust as percentage of index (%) Yield rate (%) Payment rate (%) Charge-off rate (%) Total delinquency rate (%)
EMEA Index 3,247.1 16.9 23.3 1.5 1.2
Gingko 709.7 21.9 7.9 6.2 3.3 1.9
MCCP* 499.6 15.4 13.5 6.7 0.7 0.2
Columbus** 604.0 18.6 19.9 7.3 0.0 0.3
Oneycord 735.4 22.6 14.0 8.5 2.0 2.4
Swiss Cards 698.4 21.5 29.0 82.0 1.0 0.7
*The series 2017-1 notes have been called, and new notes were issued in October 2019.
** The series 2019-1 have been called and new notes were issued in June 2021.

Table 7

Performance Against Base-Case Assumptions
Charge-off rate (%) Yield rate (%) Payment rate (%)
Trust 12-month average Three-month average Base case* 12-month average Three-month average Base case* 12-month average Three-month average Base case*
Columbus 4.8 0.0 10.0 20.5 19.2 18.5 7.2 7.2 3.4
Gingko 3.6 3.1 7.8 8.2 7.9 7.9 5.6 6.1 N/A
MCCP† 1.3 1.0 8.0 13.6 13.3 13.8 5.9 5.8 1.9
Oneycord 2.0 2.1 9.0 13.8 13.6 13.5 8.0 8.4 8.0
Swiss Cards 1.1 0.9 3.5 28.0 28.6 8.0 77.7 79.1 32.0
*In our analysis, we subject base-case rates to stresses, haircuts, and lagging. For the yield rate, these values cannot be directly compared with our base-case assumptions because they include interchange, which we do not give credit for in our analysis. †The series 2017-1 notes have been called, and new notes were issued in October 2019.

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Glossary

Delinquency rate

Delinquency data are a leading indicator for the underlying proportion of accounts that roll through the delinquency categories before the debt is charged off. A high proportion of 90+ day delinquencies will typically roll through to charge-off within three months, and so delinquencies, and especially 90+ day delinquencies, are a good indicator of how the charge-off index might perform.

Charge-off rate

We define charge-offs as losses on principal receivables divided by the pool balance at the beginning of the month, which is annualized and expressed as a percentage. They are effectively gross losses.

Payment rate

We define the payment rate as the total collections received in a particular month divided by the pool balance at the beginning of the month, expressed as a percentage. In our view, a high payment rate is beneficial for the transaction as during the amortization period the note principal is paid down more quickly, meaning noteholders are exposed to losses for a shorter period.

Yield rate

We define yield as finance charge and fee income in a particular month divided by the pool balance at the beginning of the month, annualized and expressed as a percentage. We believe high-yield is beneficial for the transaction, as it means a higher income to offset any losses and pay the interest on the notes.

Net spread

We define net spread as three-month average yield rate minus three-month average charge-off rate.

Related Criteria And Research

This report does not constitute a rating action.

Primary Credit Analyst:Amit Einhorn, London +44 (0)20 7176 0513;
amit.einhorn@spglobal.com

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