Leading card industry advisor, R.K. Hammer, just released their report for card portfolio sales last year, showing the industry had $33.1 Billion in closed deals, involving 37 portfolios, and with another $6 Billion in deals pending at year end 2012, scheduled to close early in 2013. These dollar and transaction amounts were up substantially from 2011 year end numbers, when only 10 card deals for $5.3 Billion were reported. Hammer indicated a number of factors have contributed to the better market for card deals recently:
First, the effects of a limping economy between 2008 and 2011 and a modest recovery are finally working through the system, with credit unions and banks and card issuers restoring dividends, capital (and confidence), with a focus on operating expense and rebuilding their bruised business models.
Second, the impact of recent credit/debit legislation has been a hit to those who use to buy lots of credit card portfolios. Some of the largest/most active buyers in the past have simply had their own balance sheet/credit quality troubles to deal with. This, however, brought a new chance for smaller regionals to fill in the gap and buy. We saw more new bidders for card deals last year than in any previous one, mostly from regionals successfully jumping into the acquisition space.
Third, significantly rising sale premium prices during 2012 have increased the number of potential sellers as well. Fewer sellers were therefore sitting on the fence as in the recent past, and have come to market to take advantage of current deal prices, which we expect to continue to climb in 2013.
Fourth, card ROA earnings continued to improve; and this has brought back many previously sitting on the sidelines back into the market, with better selling conditions, again leading to better prices.
Going forward, the R.K. Hammer forecast for 2013 indicates more robust M&A growth, with buyers having improved their managed balance sheets, charge offs having reduced to more manageable levels, and thus turning their attention back to addressing the marketplace and growing their card loans.
The take away: more card buyers willing to return to the deal war room actively looking for good deals and more sellers wanting to get better prices – thus, sale prices rising accordingly.
This is the second in the R.K. Hammer series of year end releases, reported weekly on key metrics and trends in the industry from the prior year. Last week, release #1 dealt with the Card Industry’s P/L, this week, M&A activity; next week, Card Fees paid by consumers.
The Research and Analysis division at R.K. Hammer, also now known as the Card Knowledge Factory®, has for over 20 years published their findings each January in a weekly series of news releases covering major aspects of the business. For more complete findings on any weekly release topic and other reports and research available, please go to: cardknowledgefactory.com