NEW YORK--(www.AllPayNews.com [1])--Fitch Ratings said today that as we approach the midpoint of 2008, a weakened U.S. economy continues to exert pressure on the consumer, as observed through the continued deterioration of credit card portfolio performance. Issuer credit losses have approached, and in some cases surpassed, five-year historical averages and many management teams are predicting worsening metrics for the latter part of 2008 as home price depreciation, rising unemployment rates, and higher energy prices continue to put pressure on consumer wallets. While Fitch believes card issuers have taken steps to manage the near-term pain, Fitch expects the credit quality picture to get worse before it gets better.

In this Fitch Special Report released today: 'Credit Cards: Asset Quality Review', Fitch discusses current asset quality trends in the credit card market and provides updated growth and asset quality statistics for some of the largest credit card issuers.

From a funding perspective, disruptions in the capital markets combined with deteriorating asset quality expectations have impacted issuers' growth plans for 2008, particularly for those who remain reliant on securitizations for funding. Credit card asset-backed securities (ABS) transactions completed to date in 2008 exhibit higher spreads and shorter durations. The decline in base interest rates has offset a portion of the wider spreads, but the all-in cost of issuance has increased as issuers have largely retained notes rated below 'AAA', which requires a higher capital commitment to account for the higher-risk asset on the balance sheet. Additionally, refinancing risk has increased as issuers have generally issued shorter-duration paper, expecting funding costs to 'rationalize' somewhat before the notes mature. Still, Fitch recognizes that many of the larger card issuers have access to cheaper and more stable deposits and are less reliant on ABS for funding.

While asset quality metrics have deteriorated and funding costs have increased, large credit card issuers have generally maintained Stable Rating Outlooks, as portfolio risks have been offset with greater contingent liquidity and higher capital levels.

The Fitch Special Report, 'Credit Cards: Asset Quality Review,' is available on the Fitch Ratings web site at www.fitchratings.com [2].

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com [3]. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Contacts
Fitch Ratings, New York
Meghan Crowe, CFA, +1-212-908-9121
Christopher D. Wolfe, +1-212-908-0771
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