barclaycard dumps 1.6b in subprime card balances - … dumps $1.6b in subprime card balances by...
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BULLETIN Republican Rep. Nunes met source at White House before surveillance announcement
Barclaycard dumps $1.6B in subprime cardbalances
By MarketWatchPublished: Mar 26, 2017 4:09 p.m. ET
By AnnaMaria Andriotis
Barclaycard is shedding a chunk of its subprime card balances, in a deal that reflects diverging views in the card industry about
the future of the U.S. economy and the wisdom of wagering on risky borrowers.
The credit-card issuer, a unit of British bank Barclays PLC, sold $1.6 billion of credit-card balances owed by mostly near-prime
and subprime borrowers to privately held personal-loan firm Credit Shop Inc., according to people familiar with the matter.
The deal marks the first time that Austin, Texas-based Credit Shop, which is mostly focused on extending personal loans to
near-prime and subprime borrowers, purchased credit-card accounts and balances. The firm, which launched in 2013 and
counts Chinese firm Renren Inc. as an investor, is planning on launching its own credit card later this year, according to people
familiar with the matter. Several executives at Credit Shop were previously with Barclaycard.
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Subprime card issuance has been on the rise in recent years, partly as some banks have grown more comfortable taking on
more risk and some nonbank lenders enter the card market for risky borrowers.
At the same time, there is growing anxiety among investors and some lenders that a turn in the credit cycle could be near and
that losses could soon rise. Card defaults, while still near record lows, have been on the rise recently. Several large lenders also
recently reported jumps in charge-offs, which are unpaid balances that lenders write off as losses when they don't expect
borrowers to pay them.
Missed payments are up at Barclaycard. Thirty-day delinquencies hit 2.6% in the fourth quarter, up from 2.2% a year prior,
while 90-day delinquencies reached 1.3%, up from 1.1%, according to Barclays' latest earnings report. Most of the credit-card
balances sold in this deal weren't delinquent, said people familiar with the matter.
While they represent more risk, subprime borrowers pay higher interest charges that can result in bigger returns for lenders in
a strong economy.
Nonbanks are becoming more active in the subprime card market as many banks remain hesitant to expand in this space.
Subprime lender LendUp launched a credit card in 2015 that it has since expanded in availability.
The balances Credit Shop bought from Barclaycard come from a range of Barclaycard cards, but they aren't associated with the
issuer's co-branded cards that it has with airlines, hotels and other merchants and that account for the majority of its overall
card portfolio.
Overall, the balances sold account for about 6% of Barclaycard's total card balances as of the end of 2016 but comprise nearly
30% of its non-cobranded card balances, said people familiar with Barclaycard.
Once a relatively small player in the U.S. card market, Barclaycard has been acquiring large accounts over the past year as it has
focused on expanding its presence in the U.S. credit-card market.
Much of this growth has occurred on the co-branded side, where the issuer lends to consumers who are mostly prime but also
include subprime, a lending mix that likely will continue going forward, according to a person familiar with the matter.
It won the JetBlue credit cards last year -- an account that was previously with American Express. Barclaycard also was involved
in brokering a rare deal last year when it got the American Airlines co-branded card for in-flight and in-airport sign ups.
Citigroup Inc., which previously had the entire portfolio, kept the card for sign-ups elsewhere.
Total U.S. purchase volume on Barclaycard credit cards increased 8% in 2016 to $70.5 billion, according to the Nilson Report, a
trade publication. It is the ninth largest U.S. card issuer by both volume and outstanding balances.
Write to AnnaMaria Andriotis at [email protected]
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19 hours agoJames Decken
Near Prime or Subprime - more like those in default already. Perhaps the tide is already running out again. Will it be a reverse like tsunami like lasttime ? Don't worry just throw another 20 Trillion on the backs of the remaining Americans with a productive job. “If the American people ever allowprivate banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow uparound them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.”–Thomas Jefferson
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19 hours agoChris Weiler
Wonder what the rate for swaps are on these cards. Shadow banking making a return.
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