2013 Card portfolio sales update

(January 13, 2014) — Leading card industry advisor, R.K. Hammer, just released their estimate for card deals done in 2013, and forecast for 2014.  It is estimated that ten portfolios worth $17.2 Billion were involved, according to Hammer.  This was down from year end 2012 numbers, when an estimated $33 Billion in 37 portfolios were done that year.

# Card Portfolios Sold

2013      10

2012      37

2011      10

2010      12

2009      14

A number of factors seemed to contribute to the most recent downtick in the number of deals since 2012 – a huge year by any historic measure:

First, the underlying economy has come back, but not fully roaring just yet.  It is true that charge offs have significantly declined for most, and dividends and capital have been well restored.  But some issuers sitting on the sidelines as to whether to sell or not have not surfaced yet.  2014 will prove better.

Second, the card industry hit by new regulation and legislation during the past five years is still undergoing a transformation of previous business models.  Larger scale players have resumed massive marketing campaigns to reboot outstandings, but others have not to the same extent.

Third, this can lead to inertia, a trend where those not sure fail to make steps they might have otherwise taken.  Again, 2014 is going to show those with best practices card operations will be the standouts.

Fourth, good news on the profit front – after the steep fall in ROA during/immediately following the recession pre-tax ROA/ROE earnings for card have continued to climb year over year ever since, reducing financial pressures on issuers who might have otherwise considered selling such portfolios, and who are now enjoying those higher returns.  Card, with all its challenges, is still the best business in financial services organizations, in terms of ROA/ROE.  That includes banks and CU’s.

Fifth, with fewer deals out there, it is likely that bonafide buyers will tend to raise their war chests in 2014 and thus their offers for desirable card assets, especially those with strong relationships and ongoing agent programs going forward. The better the agent relationship and brand loyalty of any given party, the more demand for those underlying assets.  It’s supply and demand economics all over again, with fewer deals of scale out there at the moment.  As that changes, we should see a larger number of potential sellers actually sell in 2014, as their intended card portfolio sale price hurdles are met or exceeded by eager buyers needing to once again grow their card businesses in a better economy.

It is found particularly interesting to many that buyer/investor sentiment seems higher for all classifications and segments of card portfolios:  prime and super prime, and now “near-prime” and prepaid, too; all should benefit from a better, financially healthier market in 2014.

“We think the take away is this,” noted Hammer:  2012 seems now like an aberration period for card deals, with many very large sellers adding to the growing number and size of deals done that year.  2013 was more back to the norm, as between 2009 – 2011, around $10 billion in card sales each year, in a dozen or so transactions.  The jury is still out as to just how much higher 2014 card deal flow and prices will prove to be, but the direction will be decidedly upward in our model.”

For a more complete analysis on historic deals done and card industry portfolio prices paid, go to:  Card Knowledge Factory®, or R.K.  Robert Hammer is a card industry expert with 30 years of experience doing card deals.  He is Founder and CEO of leading card advisor, R.K. Hammer (Thousand Oaks, CA), and the creator of Card Knowledge Factory®, the research and analysis division at the Hammer company.  The practice is segmented into three major core competencies:  valuing and brokering card portfolio sales, serving as interim management for card companies going through transition, and as an expert witness for card issuers in litigation or valuation disputes.                

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