Lenders will continue to look for opportunities to buy loan portfolios, according to a report released yesterday by Bank of America Merrill Lynch analysts.
This is happening as organic growth has stopped due to low spending and tighter underwriting standards, they said. Analysts explained that the lack of organic receivable growth has limited the available ABS supply.
For instance, GE Capital has bought sales finance portfolios from Citi Retail Partner Cards. The purchase is part of Citigroup's restructuring efforts that were announced in January 2009. It also follows the firm's recently announced Student Loan Corp. sale. Citi Retail Partners is still part of Citi Holdings, which comprises the businesses and assets that Citigroup wants to sell.
According to BofA Merrill analysts, the sold portfolios do not form a part of Citibank Omni Master Trust (COMNI). COMNI funds close to $33 billion of receivables that were generated under private label, co-branded (Visa, MasterCard or American Express) and other revolving credit card programs with Home Depot, Sears, Macy's as well as a number of oil and gas programs, the analysts enumerated.
The Citibank portfolios were bought by GE Capital Sales Finance, a subsidiary of GE Capital that is separate from the unit that manages the private label credit card portfolio funded by the GE Master Note Trust (GEMNT), they noted.
GEMNT funds approximately $18 billion of receivables generated under credit card accounts with various designated retailers, including Dillard's, Gap, JC Penney, Lowe's, Sam's Club, and Wal-Mart).
The $1.6 billion purchased portfolios include close to three dozen retail partner relationships that collectively represent over 18,000 small to mid-sized Main Street merchant locations across the country, BofA Merrill noted, citing a related press release issued by GE Capital.
The purchased portfolios offer consumer financing programs and related services retailers and dealers in four main segments: home furnishings; flooring; consumer electronics and heating, ventilation and air conditioning (HVAC).
Citi will provide interim servicing under terms of the agreement and until GE Capital Sales Finance completes the conversion of merchants and cardholder accounts to its own system, BofA Merrill analysts reported.
