Back Cross River Intelligence Archives

Mixed Credit Card Issuers’ Earnings; PeerIQ’s MPL Loan Performance Monitor

By Vy Phan

January 27, 2019


For the first time since the financial crisis, CEOs of the six largest banks were summoned to Congress to testify before the new financial services. The panel is eyeing dates in March or April.

Earnings season continues with credit card issuers reporting this week. Credit card master trust data shows that delinquencies have picked up from their lows but remain significantly below their peaks. Issuers (with the exception of Capital One), have increased loan loss reserves at a rate higher than loan growth as credit renormalization continues. ROE has jumped significantly YoY driven by loan growth, improved NII, low charge-offs and the effects of tax cuts. We will look at credit-card issuers’ earnings in detail below.

30 and 90-day delinquency rates from credit card master trust data

Source: Bloomberg, Bank Credit Card Trust Data, PeerIQ

In MPL securitization news, Prosper’s PMIT 2019-1 is a $172 Mn deal that KBRA has rated A on the senior tranche. PMIT 2019-1 is backed by collateral owned by Prosper, unlike prior deals which were backed by collateral owned by Prosper’s consortium of buyers. This is the 2nd MPL deal of 2019 after SOFI 2019-A, and is the first consumer loan deal of 2019. The weighted average spread on SOFI 2019-A was 23 bps wider than that on SOFI 2018-D given the market volatility in 4Q18. We will keep an eye on how this latest consumer deal will price.

KBRA has rated the senior tranche on Ygrene’s latest $225 Mn PACE deal AAA. The senior tranches priced at 120 bps over swaps. KBRA has rated the senior tranche on Mosaic’s latest $260 Mn solar securitization A.

In this week’s newsletter, we look at the fourth quarter earnings of credit card issuers and present our latest MPL Loan Performance Monitor.

PeerIQ’s Webinar on Consumer Credit Digest for Unsecured Consumer Term Loans

PeerIQ will be hosting a webinar on Webinar on Consumer Credit Digest for Unsecured Consumer Term Loans on Wednesday, the 30th of January at 2 pm EST. Join us for this 30-minute webinar where we will discuss:

·       A brief overview of consumer credit bureau data

·       How TransUnion’s data was ingested and transformed to power the Digest

·       Review and commentary on key charts contained in our first full issue

Click here to register and to add the invitation to your calendar.

                                                       Source: PeerIQ


PeerIQ’s Loan Performance Monitor (as of October 2018)

We are pleased to release our latest MPL Loan Performance Monitor which tracks the delinquency rates, cumulative losses, cumulative prepays and transition matrices using public marketplace lending data that comprises unsecured consumer loans originated by Marketplace Lenders.

Some highlights from the latest (as of October 2018) report are:

  • Delinquencies on the 2017 vintage in the first 21 months have remained higher than those on the 2015 and 2016 vintages, despite tightening underwriting standards.
  • Cumulative loss rates on the 2017 vintage are lower than those on the 2015 and 2016 vintages. Cumulative losses on the 2015-2017 vintages are outpacing those on earlier vintages.
  • Cumulative prepayments have picked up, with the 2017 vintage paying significantly faster than all prior vintages.

Source: PeerIQ

Mixed 4Q Credit Card Issuers’ Earnings

Credit card issuers had a mixed quarter. All issuers, except Capital One, saw revenue growth and all issuers saw significant earnings growth YoY. AmEx and Synchrony delivered the highest loan growth. Synchrony extended its retail card partnership with Sam’s Club although Walmart has moved its retail card business to Capital One.

Executives were upbeat on the state of the US consumer and expected continued increases in consumer spending. Discover noted that severities on defaulted loans had been picking up as borrowers have been more indebted than in the past.

Stock price performance post earnings has also been mixed with Capital One down by ~6% but Synchrony up by 11%. We look at issuers’ earnings individually below.

Source: Bloomberg, PeerIQ

Revenues at American Express grew by 8% YoY to $10.5 Bn to record levels.

Capital One’s was the only issuer to have seen a drop in revenues and loans outstanding. Revenues fell by 1% YoY to $7 Bn.

Discover’s revenues grew by 12% YoY to $3.4 Bn. Earnings grew by 78% YoY to $0.7 Bn.

Synchrony’s revenues grew by 14% YoY to $4.9 Bn. Earnings more than doubled YoY to $0.8 Bn.


Industry Update:

 Lighter Fare: