Too Good To Sell? CU Card Performance Continues To Rise; Card Portfolio Sales Drop Markedly
ALEXANDRIA, Va. -- An examination of credit union data from last year reveals that in the face of growing problems in the nation's credit markets, credit union card portfolios continued arcing upward in 2007 even as the market for those portfolios showed the sharpest decline in six years.
Market and card performance analysis conducted by two noted CU card brokerages served to highlight and illustrate the two trends.
Asset Exchange, a card brokerage and consultancy owned by Fidelity National Information Systems, reported that:
- Roughly 2,000 credit union card portfolios worth more than $1 million grew by 13.4 % last year to reach $29.6 billion. Average balances per account grew 10% overall, to $2,500.
- At the same time, the firm noted that 86% of CU card portfolios grew last year, with 69% of them growing more than the rate of inflation. Card assets also grew slightly from 4.63% of overall CU assets in December 2006 to 4.96% in December 2007.
- Meanwhile, CU card portfolio sales dropped over 2007, moving down 15% in volume from $460 million in 2006 down $390 million in 2007.
Asset Exchange declined to explicitly link the trends, but commented on the possibility of cause and effect.
"[The sales decline] may reflect the strength credit union card portfolio performance or reduced interest in selling the asset to an outside buyer," AE said.
Brookwood Capital, the CU card portfolio brokerage that brokered the most recent big CU card portfolio sale--the $44 million Credit Union of Texas sale to FIA Card Services Bank of America (See related story, page 1), reported similar numbers.
According to its analysis, 61 CU card portfolio's changed hands in 2007, the lowest number of sales since 2003. Brookwood reported those sales were worth $377 million, also the lowest number since 2003.
The firm also reported that, since 2002, approximately 15% of CUs that have had card portfolios have sold them, but Tim Kolk, managing partner with Brookwood, acknowledged that estimate did not reflect CUs that had not renewed their agent issuing agreements and had instead gone back into issuing their own cards again.
"Overall, year to date results put credit union portfolio sales slightly below the results of the past several years," the firm said. "It is uncertain if recent economic downturns will accelerate or further slow the eventual portfolio sales volume in 2008."
That, indeed, is the core question and no one wanted to speculate on the record on that might be ahead in the CU card portfolio market. Several credit union analysts declined to speak since they are not card specialists, but did point out that a downward trending economy could make CU card programs even more important as tools credit unions could offer members seeking ways to restructure and refinance existing debt.