The ABS Angle

Research evidence excerpt

The ABS Angle

Barclays | The ABS Angle

In Focus: Consumers still spending, still paying

Large money center banks kicked off 2Q26 earnings this week. Mostly improving credit

performance for consumer-managed portfolios provides a positive read-through to related

consumer ABS, particularly prime auto and credit card ABS. This aligns with our view that the

macroeconomic backdrop is supportive for consumer credit, on net. However, pockets of

weakness at the margin and current spread levels argue for selectivity among subprime

sponsors and within the capital stack.

2Q bank results provide positive read-through for consumer ABS

During 2Q, bank credit card portfolios saw higher receivables balances and purchase volumes

y/y, while credit metrics improved (Figure 1). Similarly, retail auto portfolios grew at JPM and

WFC and 30+ day delinquency rates were lower. JPM saw lower NCOs, but WFC saw a moderate

increase y/y (Figure 2). Management teams describe the consumer as strong and resilient:

• Bank of America (BAC): "The economic backdrop remains very constructive...Consumer

spending has recently expanded and continued to outperform our expectations... the US

economy has proved more durable than expected, supported by the strong consumer, ongoing

AI-driven investments, though inflation and tighter monetary policy remain key

risks...Consumers remain resilient as average deposit investment balances and spending all

showed linked quarter increases. Additionally, consumer credit quality remain strong, and in

line with our expectations"

• Citigroup (C): "The US consumer has been resilient… Credit [performance] has been in line or

better than our expectations." Management is watching the relationship between inflation,

wages, and the savings rate.

• J.P.