Zebeck Fired

The board of directors of Metris Companies (Direct Merchants Credit Card Bank) announced over the weekend the termination of Ronald Zebeck, former chairman and CEO of Metris. The board also announced the appointment of David Wesselink to the position of chairman and CEO. Metris has been struggling in the wake of the acute fallout in the sub-prime credit card market. For the third quarter, Metris reported a net loss of $1.3 million following a second quarter loss of $36.4 million. The managed net charge-off rate was 15.1% for the third quarter, compared to 15.0% for the prior quarter and 10.7% for the third quarter of 2001. The managed delinquency rate was 10.8% for the third quarter, compared to 10.2% at June 30th, and 8.9% one year ago. Before joining Metris, Wesselink was with Advanta, which he joined in 1993 as SVP/CFO. Prior to Advanta, he spent more than 20 years at Household. He was named HFC’s CFO in 1982 and a SVP in 1986. Zebeck was named Metris chairman in May 2000. He became President and CEO of Metris Companies when the company went public in October 1996. Prior to joining Metris, Zebeck created and launched the General Motors credit card in 1992. Before General Motors, he served as director of marketing at Advanta Corporation and Colonial National Bank USA, and spent 10 years with Citicorp in New York. Metris’ stock has collapsed to $3 per share from its year ago price of $28 per share. For complete details on Metris’ latest financials visit CardData ([www.carddata.com][1]). (CF Library 5/10/00)

[1]: http://www.carddata.com

Advanta.com Milestone

Advanta says it conducted the millionth user session on its Web site for small business credit card holders after launching the site eleven months ago. In honor of the millionth user session milestone, Advanta will donate $5,000 to The Rise School, an early education center focused on children with Down syndrome.

Metris Junk

Standard & Poor’s yesterday cut the ratings on some of Metris/Direct Merchants Bank credit card-backed bonds to junk status. Metris stock is now hovering at $3.75 per share, down nearly 87% from its 52-week high. Metris, a sub-prime credit card specialist, reported a charge-off rate of 16.56% and a delinquency rate of 11.63% for the latest performance cycle. The increased charge-off rate has negatively affected excess spread rates, causing excess spread levels to fall from their two-year average of 7.18% to a current three-month average of 5.93%. S&P says the performance trends have deteriorated during the past two years with more pronounced deterioration during the past six months, as the Metris Trust has reported increased delinquency and charge-off rates. While the Metris Master Trust-related transactions continue to benefit from a lower interest rate environment, the lower base rate costs have not wholly offset the trust’s increased charge-off rates. As a result, despite having a lower cost of funds, the excess spread levels for the trust continue to drop.

Card Charge-offs

The FDIC’s latest commercial banking performance report says the loss rate on credit cards remains high. According to the report, charge-offs of credit card loans totaled $3.9 billion in the third quarter, an increase of 35.6% compared to a year ago, and $133 million more than banks charged-off in the second quarter. The annualized net charge-off rate on credit card loans in the third quarter was 6.05%, slightly lower than the 6.08% rate in the second quarter, but well above the 5.20% rate of a year earlier. This is the fourth consecutive quarter that the loss rate on banks’ credit card loans has been above 6%, a level never previously reached in any quarter during the 19 years that banks have reported credit card charge-offs. Even with the high level of charge-offs, the amount of credit-card loans that were noncurrent increased by $685 million (13.6%) during the quarter. Also, the amount of credit cards that were 30-89 days delinquent on scheduled payments increased by $1.0 billion (15.8%). Over the last 12 months, noncurrent credit-card loans have increased by $972 million (20.4%), and 30-89 day delinquencies are up by $1.4 billion (22.5%). The FDIC says that despite the historically high loss levels, the profitability of credit card lending continued to improve, as net interest margins remained well above the industry average, and income from fees and securitization activities increased.

Card Bond Pulse

Bank credit card charge-offs, among credit card-backed securities, rose slightly in September, following declining losses in August. The monthly charge-off rate rose slightly by 20 bps to 6.8% in September from 6.6% in August. Standard & Poor’s “Credit Card Quality Indexes” also found that delinquency rates in August rose to 5.20%, a 10 bps increase from July’s number. In September, delinquencies came in at 5.45%, a 25 bps increase. S&P expects bankruptcy-related defaults to add to a growing default trend heading toward the end of the year. Yield remained stable in September at 18.3%, but with the Federal Reserve cutting rates this month and another cut likely, Standard & Poor’s anticipates that yield may drop further. However, the impact of a further cut would be minimal, as many issuers have already hit their cap floors. The weighted average base rate for the trusts tracked by the indexes continues to benefit from recent Federal Reserve actions and remains unchanged at the current low level of 4.4%.

Performance Month Sep 00 Sep 01 Jul 02 Aug 02 Sep 02
Yield(%) 18.9 18.9 18.7 18.3 18.3
Charge-offs(%) 5.1 6.5 6.8 6.6 6.8
Weighted base rate(%) 8.4 5.7 4.4 4.4 4.4
Excess spread (%) 5.5 6.7 7.5 7.4 7.2
Delinquencies (%) 4.4 5.1 5.1 5.2 5.4
Payment rate (%) 15.4 14.8 16.1 16.1 15.6
Source: Standard & Poor’s Ratings Services

CompuCredit 3Q/02

Atlanta-based CompuCredit reported third quarter net income of $22.0 million, compared to a $36 million loss in the prior quarter, and $15.0 million in income for 3Q/01. The company’s loan portfolio passed $3.0 billion during the quarter, as the company took over accounts cast off by Providian. During 3Q/02, CompuCredit added 2,286,000 accounts to bring its account base to 4,070,000. CompuCredit’s delinquency rate (60+ days) increased from 9.0% for 2Q/02 to 12.3%. One year ago CompuCredit’s delinquency rate was 10.9%. The adjusted net charge-off rate was 8.3% in the third quarter of 2002 as compared to 15.0% for the second quarter of 2002. The net interest margin was 21.4% in the third quarter of 2002 as compared to 13.1% for the second quarter. For complete details on CompuCredit’s third quarter performance visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com

3Q/02 Charge-offs

While delinquency rose 37 bps during the third quarter compared to the second quarter, charge-offs declined 95 bps during the same period. Nine out of the top ten U.S. issuers reported declines in charge-offs during the third quarter. Metris/Direct Merchants Bank was the only issuer reporting an increase. However, Metris charge-offs were only up 10 bps. Compared to the third quarter of 2001, charge-offs were, on average, 8.1% higher. The average third quarter charge-off rate was 7.06%, compared to 6.53% one year ago. Excluding the huge losses at Providian and Metris, the average charge-off rate for the third quarter would have 5.42%. Among issuers reporting the steepest decline since last year are Fleet and Bank One. All three major sub-prime issuers, Capital One, Providian, and Metris reported the biggest increases in charge-offs since 3Q/01. For 3Q/02, Discover reported a charge-off rate of 6.27%, compared to 6.30% in the previous quarter, and 5.79% one year ago. For American Express, losses slowed from 6.20% in 2Q/02 to 5.60% in the third quarter. During 3Q/01, American Express experienced a charge-off rate of 5.60%. For historical data on charge-offs visit CardData ([www.carddata.com][1]).

3Q/02 2Q/02 1Q/02 3Q/01 ANN CHNG
1. Citigroup: 5.86% 6.50% 6.41% 5.48% +6.9%
2. MBNA: 4.84% 5.09% 5.00% 4.90% -1.2%
3. Bank One: 5.00% 5.62% 5.69% 5.89% -15.1%
4. Chase: 5.51% 6.42% 5.87% 5.64% -2.3%
5. Cap One: 4.96% 4.98% 4.70% 4.51% +10.0%
6. Providian: 16.71% 17.53% 15.05% 10.33% +61.8%
7. BofA: 5.13% 5.59% 5.43% 4.81% +6.7%
8. Household: 6.81% 7.54% 7.17% 6.75% +0.9%
9. Fleet: 5.25% 5.81% 5.42% 6.26% -16.1%
10. Metris: 15.10% 15.00% 13.00% 10.70% +41.1%
AVERAGE: 7.06% 8.01% 7.37% 6.53%% +8.1%
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com

Providian 3Q/02

Providian reported third quarter net income of $42.1 million compared to second quarter net income of $153.9 million, and net income of $57.2 million one year ago. Providian is in the process of shedding sub-prime accounts and says its portfolio mix is now 60% middle market/40% prime market. This month the Company completed the transfer of servicing for the higher-risk portfolios to CardWorks and CompuCredit. During the third quarter, the Company originated over 520,000 new customer accounts compared to the origination of approximately 350,000 new customer accounts in 2Q/02. Providian ended the third quarter with $19.4 billion in total managed credit card loans and 12.7 million accounts, compared to $19.6 billion in managed credit card loans and 12.9 million accounts at the end of the second quarter. Delinquency is running nearly 29% above last year levels, and charge-offs are up 60% over 3Q/01. For complete details on Providian’s third quarter performance as well as prior quarter visit CardData ([www.carddata.com][1]).

Providian Card Portfolio Snapshot
3Q/02 2Q/02 1Q/02 4Q/01 3Q/01 Ann Chng
Loans $19.4b 19.6b 22.1b 32.6b 31.7b -38.8%
Accounts 12.7m 12.9m 15.0m 18.4m 17.9m -29.1%
Delinq* 11.23% 10.16% 10.22% 8.81% 8.71% +28.9%
Losses 16.71% 17.53% 15.05% 12.70% 10.43% +60.2%
* 30+ days past due;
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com

People’s 3Q/02

People’s Bank reported that managed net charge-offs for credit cards have decreased every quarter since September 30, 2001 and managed delinquencies have been declining since June 30, 2001. From the peak level in the third quarter of 2001, managed net charge-offs improved $22.3 million, or 34%, and were $7.9 million, or 15%, lower than the second quarter of 2002. Managed delinquencies declined $3.5 million, or 3%, from the second quarter of 2002. The net charge-off rate declined by 92 basis points from the second quarter of 2002 to 5.99% for the third quarter. Managed third quarter credit card receivables totaled $2.0 billion, a decline of $18 million from the second quarter. Delinquencies as a percentage of quarter-end managed loans for the credit card services segment were 3.41%, compared to 3.56% for 2Q/02 and 4.19% for 3Q/01. For complete details on People’s third quarter performance visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com

Sears 3Q/02

The Sears “Gold MasterCard” topped $10 billion in outstandings during the third quarter. More than 28 million consumers now carry the Sears bank credit card compared to 17 million on year ago. Outstandings for the Sears retail credit card declined to $18.5 billion compared to $23.2 billion one year ago. Overall, Sears’ Credit and Financial Products unit had operating income of $284 million, down 28% compared to the prior year. Revenues for the division increased 4% from a year ago to $1.4 billion, due primarily to higher average receivable balance growth. The net charge-off rate for the quarter decreased to 5.55% from 5.62% last year, reflecting increased charge-offs offset by the effect of receivables growth. Year-over-year delinquencies declined 17 basis points from 7.41% to 7.24%. The domestic allowance for uncollectible accounts of $1.6 billion is 5.57% of ending credit receivables, compared with 5.10% at the end of last quarter. For complete details on Sears’ third quarter performance visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com

Chase 3Q/02

Chase has surpassed the $50 billion mark in outstandings as nearly 900,000 new accounts were added during the third quarter. Since 3Q/01 the Chase card portfolio has grown 31% primarily due to its acquisition of Providian receivables. On a managed basis, the credit card net charge-off ratio was 5.51%, compared to 6.42% for the second quarter and 5.64% for the third quarter of 2001. The improvement from the second quarter reflects lower bankruptcies and higher balances. During the quarter, Chase boosted loss reserves by $189 million to comply with new FFIEC draft guidelines. Chase ended the quarter with $51.1 billion in outstandings compared with $49.5 billion in the previous quarter, and $38.9 billion in the year ago quarter. Third quarter volume was $23.0 billion, a 28% gain over 3Q/01. Total accounts now stand at 28.6 million compared to 23.4 million on year ago. During the third quarter, Chase signed up 900,000 new accounts but closed 400,000 accounts. For complete details on Chase’s third quarter performance visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com