Stung by the loss of the Costco co-branded credit card program, the recent loss of a recent DOJ lawsuit, and the potential of rising consumer interest rates, American Express’ (AXP) Asset-Backed Securities (ABS) credit card program should strong in 2015 given its liquidity profile.
Discover’s (DFS) financial performance will face downward pressure from a number of factors including increased competition, normalizing credit performance and heightened legal and compliance expenses this year. However, operating performance for DFS’ credit card Asset-Backed Securities (ABS) is likely to remain strong in 2015, despite a decline in net income last year.
Credit card Asset-Backed Securities (ABS) metrics for the February reporting period will weaken slightly in line with seasonal trends, but should remain near record levels of strength. The Monthly Payment Rate (MPR) fell to 27.36% in January and will likely slightly decline through the first quarter due to seasonal trends.
The banking sector will be pivotal to Europe’s low carbon transition, and will finance and intermediate the vast majority of the EUR2.9 trillion capital required to implement low carbon infrastructure from 2011 – 2020. This is meant to help the Continent bring its emissions to 83% of 1990 levels by 2020 for a carbon abatement of 2.2 Gt CO2e. This, according to the “Carbon Capital” report published by Accenture and Barclays, also shows capital markets are to unlock EUR1.4 trillion for low carbon technology while 73% (EUR1.65 trillion) is to come externally from unprecedented demand for private capital and associated bank products and services. The largest share will be debt to finance the development of low carbon technology assets. The report calculates that securitization of the debt into “green bonds” – low carbon technology asset-backed securities – could provide access to secondary markets for €1.4 trillion of capital required, providing new products for pension funds, individual and other institutional investors.
Bank of America reported second-quarter 2010 net income of $3.1 billion, compared to net income of $3.2 billion a year ago, driven by lower credit costs. Bank of America agreed to sell its equity position in MasterCard, resulting in a pretax gain of approximately $440 million to focus on its core businesses and strengthen capital ratios. Its Global Card Services net income increased $2.4 billion compared to a year ago due to declining credit costs reflecting continued improvement in the U.S. economy; Revenue decreased $401 million from a year ago, driven by lower average loans and reduced interest and fee income primarily resulting from the implementation of the CARD Act, partially offset by the $440 million pretax gain on the sale of the MasterCard position. The division also reported a net loss of $9.9 billion due to the $10.4 billion goodwill impairment charge and would have otherwise reported net income of $529 million, compared to a net loss of $955 million a year ago.
JPMorgan Chase reported fourth-quarter 2010 net income of $4.8 billion, an increase of 47% compared with $3.3 billion for the fourth quarter of 2009 while full-year 2010 net income was $17.4 billion, an increase of 48% compared with $11.7 billion for the prior year. For the Card Services division, net income was $1.3 billion, compared with a net loss of $306 million in the prior year, and total merchant processing volume was $127.2 billion on 5.6 billion total transactions processed. Meanwhile, end-of-period loans were $137.7 billion, a decrease of $25.7 billion, or 16%, from the prior year and an increase of $1.2 billion, or 1%, from the prior quarter. Average loans were $135.6 billion, a decrease by 17% of $27.6 billion from the prior year and $4.5 billion from the prior quarter. With this, net revenue was $4.2 billion, a decrease of $902 million, or 18%, from the prior year. The provision for credit losses was $671 million, compared with $4.2 billion in the prior year and $1.6 billion in the prior quarter, thanks to lower net charge-offs and a reduction of $2.0 billion to the allowance for loan losses due to lower estimated losses.
As of Dec. 31, 2010, Discover Financial Services has acquired he Student Loan Corporation (SLC) from Citi to expand its presence in the private student loan market. This combines its operations with a top-three originator of private student loans in the US with more than 50 years of expertise. The sales reduce non-core assets in…
Glacier Credit Card Trust has completed its asset-backed offerings of $250,000,000 of Series 2010-1 Senior Notes and $14,551,000 of Series 2010-1 Subordinated Notes. The Series 2010-1 Senior Notes were offered at par with a coupon rate of 3.158 percent. The Series 2010-1 Subordinated Notes were offered at par with a coupon rate of 4.128 percent. Both Series 2010-1 Notes have an expected repayment date of November 20, 2015. The Senior Notes were rated ‘AAA (sf)’ and the Subordinated Notes were rated ‘A (sf)’ by Standard & Poor’s Ratings Services and DBRS Limited. Glacier Credit Card Trust was established to purchase undivided co-ownership interests in a revolving pool of credit card receivables of Canadian Tire Bank.
Discover Financial reported 3Q10 net income of $261 million compared to the year ago figure of $577.8 million and 258.0 million last quarter. This was thanks in part to $24 billion in card sales volume, an increase of 5% year-over-year; net charge-offs being down $102 million, compared to $81 million last quarter; over 30 day-delinquencies down $180 million from the prior quarter; and the continuously dropping net charge-off rate of 7.18%. Additionally, Discover Payment Services’ showed continued strong results with profit before tax up 36% from the prior year, and transaction volume of $39 billion, up 8% from the prior year.
U.S. CARD PRE-TAX PROFITS
1Q/09: $167.0 million
2Q/09: $387.9 million
3Q/09: $577.8 million
4Q/09: $546.5 million
1Q/10: $207.6 million
2Q/10: $258.0 million
3Q/10: $261.0 million
Source: CardData (www.carddata.com)
Discover Financial Services has reached an agreement to acquire The Student Loan Corporation (“SLC”) for $600 million, or $30 per share. Separately and immediately prior to the closing of Discover’s transaction, SLC will sell $28 billion of assets to Sallie Mae and $9 billion of assets to Citibank. Discover will acquire $4.2 billion of private student loans and related assets at an 8.5% discount, along with $3.4 billion of SLC’s existing asset-backed securitization debt funding. The amount to be paid by Discover for the private student loan assets is subject to a post-closing purchase price adjustment between Discover and Citibank, which owns 80% of SLC’s outstanding common stock.
Alliance Data Systems Corporation loyalty and marketing solutions has been issued $450 million of public, fixed-rate, term asset-backed securities by World Financial Network Credit Card Master Note Trust. Issued as part of the securitization program for Alliance Data’s private label credit card banking subsidiary, World Financial Network National Bank (WFNNB), the securities consist of four series of notes rated AAA through BBB with an average life of five years and carry a weighted average fixed-rate of just under 5%. The Company’s private label credit card business currently employs three sources of funding for its roughly $5 billion portfolio, representing approximately 100 retailer programs.
Alliance Data Systems loyalty and marketing solutions has closed $1.5 billion in conduit liquidity facilities, resulting in an increase of $175 million in overall conduit capacity. It has renewed a $275 million conduit facility for its Utah industrial bank subsidiary, “World Financial Capital Bank,” while its private label credit card banking subsidiary, “World Financial Network National Bank,” has completed the renewal of its $1.2 billion conduit facility. The facilities fund both existing and new private label credit card programs, currently only finance less than $750 million in card assets, providing a large source of untapped liquidity to fund growth and/or portfolio acquisitions.