Demand from buyers of credit card portfolios owned by U.S. credit unions warmed somewhat during the first half of 2011 after hitting bottom last year, according to a Sept. 13 report from TRK Advisors.
Of the nearly 2,200 credit unions whose bankcard programs have balances of $1 million or more, a total of five sold their portfolios during the first six months of this year. Four of those sales were completed during the second quarter, the Peterborough, N.H.-based portfolio sales-advisory firm says.
The total balances of all credit card portfolios sold so far this year reached $62 million, marking the highest level of credit union bankcard portfolio sales since 2009, Timothy Kolk, the firm's president, tells PaymentsSource.
The deals conducted so far this year already exceed the total of three credit union card portfolio sales last year, which together amounted to less than $20 million.
Despite the recent sales uptick, it remains unclear whether buyers’ interest will continue at this pace throughout the year, Kolk says.
"It's hard to say whether the recent activity means we are seeing a new trend of increasing sales or if what we've seen so far this year is the new state of steady sales going forward," Kolk says.
Credit unions typically sell portfolios to third parties who manage them on an agent basis.
Credit union bankcard portfolio sales peaked in 2004-2007, when they often totaled more than 60 deals per year, accounting for hundreds of millions in total portfolio balances, according to TRK data.
Anecdotal evidence suggests additional credit unions are exploring possible bankcard portfolio sales this year, but prices are still relatively low, dampening sellers' interest, Kolk says.
"Recent improvements in credit risk metrics and profitability have been supporting higher valuations, though limited buyer competition and transaction costs can make reaching financial terms difficult," he notes.
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