X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

ARLINGTON, Va. – Although hard data about card portfolio sales is notoriously difficult to find, recent news appears to confirm that the market for credit unions’ card portfolios has begun to get hot again. Wilmington, Delaware-based MBNA Corporation, one of the largest purchasers of credit union credit card portfolios, revealed last week that its purchases of credit union card portfolios has proceeded at a fast clip since the beginning of this year and one executive expects the bank will pick up the pace. Steven Fuld, senior vice president of Boston-based Kessler Financial Services, the firm which acts as an agent for MBNA in many of its card purchases, reported that MBNA had purchased 18 of its total 50 credit union portfolios in the first six months of 2003, and predicted that the company would at least maintain that rate, if not accelerate. “We have purchased as many portfolios in the first six months of 2003 as we did in all of 2002,” Fuld said. MBNA’s credit union portfolio purchases got formally underway in 2001. He estimated that six of the 18 portfolios purchased this year were valued at more than $10 million, and that the balances in the other portfolios were smaller. He also estimated that almost two million credit union cardholders across the U.S. now hold an MBNA card that is branded by their credit union. The total value of those accounts approaches $750 million, he also estimated. He would not reveal any information about premiums the portfolios might have drawn. Even more telling might be the increased activity of TNB Card Services, the Dallas-based subsidiary of credit union owned Town North Bank. TNB announced it would begin to buy portfolios about one year ago and announced the purchase of three portfolios in March of 2003. The firm is poised to announce the purchase of three more. That would mean TNB has purchased about as many portfolios in the first half of 2003 as has InfiCorp, the Atlanta-based bank that has been a leader in the market for credit unions’ card portfolios. Glen Lee, senior vice president of TNB Card Services, reported that the overall activity among credit unions evaluating their card portfolios was about the same, but added that more credit unions appeared ready to make a decision. “What’s changed now is that we are seeing more credit unions that are willing to make a sale,” Lee said. Lee would not comment on rumors that TNB has been paying high premiums for their purchases. “We are definitely competitive,” Lee said. But Brian Crawford, chief marketing officer for PSCU Financial Services, the card services firm for many credit unions that process their card transactions through First Data Resources, expressed doubt about whether MBNA’s spurt of credit union card purchases indicated a market getting hotter. Crawford noted that MBNA had entered the market for credit union portfolios relatively late and estimated that it had taken time to do the groundwork with the credit unions that had initially expressed an interest in selling in 2002. “What we have seen has been an arc of interest,” explained Crawford. When the idea was new there were a lot of credit unions asking the question and wanting to evaluate their options, he said, but added that the firm had seen the activity gradually die down. “We believe MBNA may be reaping the fruit of their previous efforts,” he added. Crawford reported that PSCU saw about 10 of their members get out of the card business in 2002 and estimated that they might see a similar number in 2003 but added that the number might also be lower. Activity Peaking Right Now However, William Koo, the CEO of Asset Exchange, the largest broker of credit union’s card portfolios, reported that his firm had seen activity pick up in the last month and a half and that a significant number of credit unions with smaller portfolios have expressed strong interest in getting a good premium. “We try to tell them that money is not the only important factor in a sale,” Koo said, “but they come back to us and say `get us the highest premium you can.’ ” Koo speculated that credit unions with smaller portfolios have heard that good premiums can be had and that now might be the time to sell. Robert Hammer, CEO of R.K. Hammer, based in Thousand Oaks, California, a credit card portfolio evaluation and brokerage firm, echoed Koo’s observations about the rising degree of interest in card portfolios that might be smaller and relatively low yielding, but which are very high quality. “ We are almost seeing an auction mentality,” Hammer reported, with an increasing number of firms willing to pay good money for portfolios they consider very high quality. Hammer said MBNA’s reported pace fits his firm’s observation that 21 of the 26 portfolios of less than $15 million that sold in the first six months of 2003 came from credit unions. Keith Floen, managing director with InfiCorp, said his firm was sticking by its observation that the pace of interest matched, but perhaps did not exceed last year’s. He did note that his firm would end up buying more accounts this year than last, because the average size of the portfolios they were purchasing is significantly larger than last years. But Karen Fry, assistant vice president for marketing for Card Services for Credit Unions, the association for credit unions that process their card transactions through Certegy Card Services, echoed Crawford’s observations that a lot of these sales represented previous sales decisions that are only now being consummated. “The fact is that most credit unions that choose to sell, have probably given up on their card programs long ago. They’ve stopped marketing them. They’ve stopped talking about them to members. They’ve stopped investing time in them,” said Fry. “Many credit unions have low rates of card penetration among existing members. That gives the competition the opportunity to `cherry pick’ the non-cardholder members with a much higher response rate and lower per account acquisition cost than traditional direct mail efforts produce.” [email protected]

Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.

Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical CUTimes.com information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers, resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
  • Exclusive discounts on ALM and CU Times events.
  • Access to other award-winning ALM websites including Law.com and GlobeSt.com.

Already have an account?

 

Credit Union Times

Join Credit Union Times

Don’t miss crucial strategic and tactical information necessary to run your institution and better serve your members. Join Credit Union Times now!

  • Free unlimited access to Credit Union Times' trusted and independent team of experts for extensive industry news, conference coverage, people features, statistical analysis, and regulation and technology updates.
  • Exclusive discounts on ALM and Credit Union Times events.
  • Access to other award-winning ALM websites including TreasuryandRisk.com and Law.com.

Already have an account? Sign In Now
Join Credit Union Times
Live Chat

Copyright © 2022 ALM Media Properties, LLC. All Rights Reserved.