BOCA RATON, FLA. - Credit card ABS market participants speaking at Information Management Network's ABS East conference held here last week forecast continued diminishing supply in the sector, with smaller issuers becoming more and more frequent. In addition, several large credit-card issuers predicted portfolio growth percentages in the low-to-mid single digits.

The major driver behind this year's light credit card ABS has been consolidation. With the consolidation, however, comes the chance for smaller issuers to grab more of the spotlight, pointed out Scott Friedman, a director at SG Corporate Investment Banking. "There is likely to be more private, smaller issuers who will come to market, issuers who will have a couple billion on their balance sheet and need to securitize," said Friedman. He speculated that student credit-card issuer First Financial Bank is likely to bring more ABS to market next year.

Citing cyclical interest rate pressures and home-price appreciation as putting downward pressure on the credit card industry in general, Capital One Financial Managing Director Jeffery Norris said CapOne expects portfolio growth in the low-to-mid single digit percentages next year.

Indeed, similarly slow portfolio growth levels are what are expected at the credit card arms of Discover Bank and JPMorgan Chase as well. Morgan Stanley Executive Director and head of securitization Woosuk Kim echoed the low single-digit growth prediction, adding that Discover has held back on its marketing efforts recently in order to focus on lowering charge-offs, a strategy that has apparently paid off. "Discover has broken down charge-offs," said Kim.

JPMorgan Associate Eve Ngan added that the company's predictions for portfolio growth are in line with the industry, and that, since its merger with Bank One Corp., JPMorgan has been working on re-establishing its credit card brand. The company is working to make the Chase brand more distinct from the Bank One name and to generate a "more icon-like brand" for its credit card, said Ngan. As for the relatively slow growth pace, Ngan said JPMorgan is determined to maintain conservative credit card lending, even at the cost of growing its portfolio.

Providian Financial Corp. Senior Vice President Mimi Mengis said the company has brought about a dramatic improvement in portfolio losses, pulling them into the 7%-to-9% range by focusing on a more mainstream market. Mengis also highlighted the much-watched bankruptcy reform law changes, adding that although the law had caused charge-offs to increase, she did not expect that to negatively impact loss rates.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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