U.S. consumer credit card portfolio sales were weak in 2010 as low demand drove the total number of deals down to merely a dozen, according to a report credit card consulting firm R.K. Hammer released this week.
Card issuers sold only 12 credit card portfolios last year, amounting to $5.49 billion in total card assets, with deals fetching an average gross premium price of 15% above their book value, Hammer estimates. That compares with 14 credit card portfolios sold in 2009 amounting to total assets of $8.8 billion that generated an average gross premium price of 13.3%.
The Thousand Oaks, Calif.-based firm, which has tracked credit card portfolio sales since 1986, bases its report on proprietary data plus information from a variety of public and private sources.
Card-portfolio sales peaked in 2006 when 83 changed hands, amounting to $90.26 billion in assets and an average gross premium price of 19.8%.
The scarcity of portfolios on the market contributed to a slight increase in prices in 2010 compared with the previous year, Robert Hammer, the firm’s CEO, tells PaymentsSource.
“There’s not a lot for sale out there, so prices stayed in the mid-teens last year, which was a slight plus for sellers,” Hammer says.
Demand for card portfolios has fallen in the past few years “because this is an industry where the business model has changed dramatically as a result of the turbulent economy, new regulations and competition,” he notes.
Looking ahead, Hammer says credit card-portfolio sales may have hit bottom last year and could improve this year.
“As banks enter 2011 with more hope for a better economy, greater government certainty with their intentions and much of the charge-off onslaught working through the queue, it is believed that more high-quality card deals will return to the market ... (but) probably not to the frothy levels of past years,” he says.
