Card Portfolio Sales Steady, But Shifts Could Start Next Year
ARLINGTON, Va. -- Since this year's final data will not be available until early 2007, it's impossible to tell precisely how many credit unions sold their card portfolios to agent issuing partners in 2006.
But brokers and analysts familiar with the market estimate that the number will come in at about what it was last year, between 60 and 70 CUs selling their portfolios with roughly $500 million in receivables moving out of credit unions.
This is significant because sales prior to last year had seemed like they were moving on a steadily upward path, but that path appears to have flattened out somewhat. The reasons for the flattening continue to be a mixture of changing card economics combined with a willingness among CUs to keep and manage their own card portfolios to draw more return from them.
But while the card portfolio market appears to have entered a more or less steady state in terms of sales, there are signs that next year will bring significant changes to the market.
First, analysts say it appears likely that more credit unions that previously sold their portfolios might begin issuing again. A number of the credit unions that signed agent-issuing contracts and sold their card portfolios in 2002 will see them come due for renewal this year. At that point they will have to decide whether they want to renew or perhaps sign an agreement with another issuer or start issuing again, according to Tim Kolk, managing partner with Brookwood Capital, an independent card broker located in Peterborough, N.H.
"Particularly in the beginning there were a good number of credit unions which took their big payments up front and didn't sign on to get as much money going forwards," Koch explained. "Well now they have had their big check and they aren't seeing as many receivables from card programs that are growing," he added.
This trend of reexamining contracts has even reached into credit unions that were considered strong advocates for their issuers. The $2.7 billion Desert Schools Federal Credit Union, headquartered in Phoenix, was the first credit union to start issuing American Express cards through its relationship with FIA, the card-servicing arm of Bank of America (then MBNA). But FIA confirmed that Desert Schools had not renewed its contract with the major card issuer.
"I agree that we are going to start seeing more credit union partners evaluating their agent agreements and making decisions about what they want to do," said Jeff Fincher, senior vice president with FIA, who confirmed that Desert Schools had left. "But we have already seen a number of our partners decide to stay with us, something that makes us pleased and proud of our program."
2007 may also be the year when a few more very large credit unions decide to sell their portfolios. According to Fincher and Kolk, the latter half of 2006 has seen larger credit unions with bigger portfolios examining the sales option, though both pointed out that merely analyzing the portfolio with an eye toward possibly selling it is not the same thing as selling. --firstname.lastname@example.org