Magazine article American Banker

Bouncing Back, Metris to Add 800K Accounts

Magazine article American Banker

Bouncing Back, Metris to Add 800K Accounts

Article excerpt

Despite a 98% drop in fourth-quarter earnings from a year earlier, Metris Cos. Inc. says it is optimistic about its chances for continuing its rebound.

After all, the Minnetonka, Minn., subprime credit card company made $33.7 million last year after a loss of $147.7 million in 2003. Its fourth-quarter delinquency rate fell nearly 2 percentage points from a year earlier, to 9.1% of managed receivables, the lowest level in three years.

Underwriting has gotten tighter, and Metris is steadily adding higher-credit borrowers to its portfolio; it added 480,000 accounts last year and seeks to add another 800,000 this year.

Its managed net chargeoff rate for the quarter dropped 6.2 percentage points from a year earlier, to 15.5%, and its owned net chargeoff rate dropped 43.4 percentage points, to 13.2%.

David Wesselink, Metris' chairman and chief executive officer, said on a conference call Thursday, "We intend to add new accounts" -- which should make up about 40% of the accounts in its portfolio by yearend -- and to "gain in credit quality."

To do that, Metris is nearly doubling its marketing investments and focusing on borrowers with Fair Isaac Corp. credit scores of between 600 and 700, he said.

The three-month average excess spread in Metris' master trust climbed 1.24 percentage points from a year earlier, to 4.86%. Metris officials said that they want that figure to rise to 7% someday, though it would take time to achieve that. Excess spread, money left over from the income stream on a book of loans after the bondholders and servicers have been paid, is a key performance metric.

Despite efforts to "rebuild" the portfolio, Mr. Wesselink said, much of the decline in delinquencies resulted from "refocused collection efforts."

Metris recently expanded its access to the capital markets by issuing asset-backed securities further down the credit spectrum than it had before. …

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