Magazine article American Banker

3Q Earnings: CompuCredit Slashes Account Acquisition Goal

Magazine article American Banker

3Q Earnings: CompuCredit Slashes Account Acquisition Goal

Article excerpt

The subprime credit card marketer CompuCredit Corp. has cut its quarterly target for credit card account acquisitions by about 75%, to between 150,000 and 200,000, citing a pullback in funding sources that began in August.

However, the Atlanta company also expressed optimism that the current environment would produce attractive opportunities for portfolio acquisitions, and said that it could rapidly increase marketing efforts if it can secure additional funding.

CompuCredit reported Monday after the market closed that third-quarter earnings fell 12.9% from a year earlier, to $46.5 million, or 95 cents a share, on a managed basis. Excluding a loss of 43 cents a share from investments in mortgage-related bonds, the figure was within the range of $1.35 to $1.50 it projected when it described second-quarter results in early August.

The company cut its fourth-quarter earnings forecast to 80 cents to 90 cents a share, from $1.65 to $1.80, primarily because of its outlook on account growth. That forecast also excludes the possibility of additional losses on the bond portfolio, which CompuCredit said are capped at the portfolio's carrying value of $12 million at Sept. 30. By early Tuesday afternoon, CompuCredit shares had fallen 14%.

Under generally accepted accounting principles, the company lost $53.2 million, or $1.10 a share, compared with earnings of $38.8 million, or 78 cents a share, a year earlier.

CompuCredit said that managed earnings were lower principally because of loss provisions for new receivables that were not offset by the recognition of the economic value of earnings streams from interest-only strips under GAAP rules.

On a conference call Monday night, David Hanna, CompuCredit's chief executive, said that "while there is uncertainty in the liquidity markets, we haven't seen meaningful changes in the payment activity or credit quality within our receivables" and that "we believe the current environment supports" account acquisitions at roughly the rate of 750,000 every three months achieved in the second and third quarters this year. …

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