TowerGroup: Asset-Backed Securities Market Will Stay Strong for Credit Card Issuers, Despite Weakening Economy

NEEDHAM, Mass., Dec. 5  /PRNewswire/ -- The recent meltdown in the subprime mortgage sector has raised investors concerns regarding the entire securitization market, negatively impacting asset-backed securitization pricing as well as the profits of those issuing these vehicles.  Yet new TowerGroup research finds that asset-backed securities (ABS) will continue to provide credit card issuers with financial flexibility to manage funding costs, as well as the ability to capitalize on the expected flow of consumer debt away from home equity lines of credit (HELOCs) and toward credit cards.

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While securitization overall has taken a hit, the impact on the credit card ABS market will be short lived.  Close monitoring of issuing banks by several government agencies means that the ABS market is subject to less volatility than mortgage-backed securities (MBS).  Though the weakening economy, rising delinquency rates, and problems with subprime will raise the cost of funding ABS issues, TowerGroup believes the credit card ABS market - which currently exceeds $400 billion - will continue to be the source of an estimated 50 percent of funding for credit card companies.

TowerGroup has found that in the U.S., new credit card ABS issues were the only asset-based segment to grow in 2007 - new issues through September exceeded $69.0 billion, a 30 percent increase above 2006.  TowerGroup anticipates a weakening of demand in the fourth quarter of 2007, due to investor uneasiness with the credit markets.  Yet it expects that full-year 2007 volumes will be 30 percent higher than those in 2006 - illustrating investors' confidence in the ABS credit card market and reassuring credit card issuers of an adequate and economical source of funds to support their growth.

The TowerGroup research report titled "Credit Card Asset Securitizations: Has the Subprime Meltdown Dampened This Market Too?" by Dennis C. Moroney, senior analyst in the TowerGroup Bank Cards practice, examines the impact of the subprime mortgage meltdown on the current and future state of the asset- backed credit card market.

The report is available to qualified members of the press for review. To request a copy or to arrange an interview with Moroney, please contact Jorge Lavina at +1.212.455.8041 or jlavina@cooperkatz.com. Those interested in subscribing to a TowerGroup research service may call +1.781.292.5200 or email service-info@towergroup.com.

Sign up for the bi-weekly newsletter, TowerGroup News, to stay informed on the latest research and events. To learn more, visit: http://ui.constantcontact.com/d.jsp?m=1101074606706&;p=oi.

About TowerGroup: TowerGroup is the leading research and advisory services firm focused exclusively on the financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world's leading financial institutions, technology companies, and professional services firms a deeper understanding of the business and technology issues impacting their organizations. Headquartered near Boston in Needham, Massachusetts, and with offices in North America and Europe, TowerGroup serves a global client base. Visit http://www.towergroup.com/ for more information.

  Contact:
  Jorge Lavina
  jlavina@cooperkatz.com
  +1-212-455-8041



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