Magazine article American Banker

3Q Earnings: Advanta's Delinquencies, Credit Provisions Rise

Magazine article American Banker

3Q Earnings: Advanta's Delinquencies, Credit Provisions Rise

Article excerpt

With rising delinquencies in the market, Advanta Corp. reported Thursday that its third-quarter lending income from card operations declined 38% from a year earlier, to $11 million.

Dennis Alter, the chairman and chief executive of the Spring House, Pa., small-business card issuer, said during a conference call that it has upgraded its collection strategies, using "sophisticated analytic techniques," though he did not give more details.

"We think these will further mitigate the effects of a weakening economy," Mr. Alter said.

Delinquencies are spreading across Advanta's clientele, he said, and he gave indications that it is concerned about the impact of the economy on the small-business sector. Provisions for credit losses in the quarter increased 59.8%, to $14.7 million, and the company's shares fell as much as 20% Thursday.

"We continue to monitor retail sales, the housing market, job formation, and the general economy. All these and other economic trends have an impact on everyone, including our customers and our company," Mr. Alter said. "Credit performance is certainly central to any lending business."

Sameer Gokhale, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., said in an interview after the conference call that the data on Advanta's customers does not suggest that they are particularly weak.

Rather, most small businesses are worried from the ripple effects in the economy, he said.

"A couple of things are happening," Mr. Gokhale said. Advanta has "had a very significant tailwind from credit quality being very good for the past a few years, that being a function of the consumer and the economy being very strong. But as we look into '08, it seems that the consumer is weakening, the economy is weakening, and that's bound to have a negative impact on credit card issuers. …

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