Analysis Finds Similar Premium Paid For Small, Large Portfolios

Register now

With many credit unions mulling or moving to sell their card portfolios, new data shows that smaller card portfolio sales can often have transaction premiums as high as large deals.

"Historically, only the largest of such sales have been thought to generate the high-end premiums, bordering at the 20% level or greater," said data released by investment bankers R.K. Hammer. Sales tracked by the firm for 2002 through February of 2003 indicate that the smaller deals are commanding better prices now, too. The vast majority of card portfolio sales continue to be credit unions, the company said.

During 2002, the company said, 37 larger portfolios sold, while approximately 120 smaller deals (as little as $1 million or less) traded hands. Through the first quarter of 2003, R.K. Hammer reported, 16 larger deals have occurred, with an average premium price of 18.94%, up 44 basis points from year-end 2002.

Company Chairman and CEO Robert Hammer added that price is only one indicator of deal value, albeit an important one. Several other factors also go into deciding to whom to sell to. He also noted that the smaller portfolios generally have much better credit quality than larger deals, driving the past price disparity between the groups much closer this year, as buyers eager to reduce their risk levels find such high quality very desirable.

R.K. Hammer further said that "smaller credit card portfolio owners have finally figured out that they, too, have a very marketable product to sell, and recently they have been leaving less money on the table at the end of their negotiations."

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER