Earnings for business credit card issuer Advanta Corp. declined 83.1% in the second quarter ended June 30, to $4 million from $23.7 million in the same period last year. The company attributed the decrease to a massive increase in provisions for credit losses, which rose 157%, to $30.3 million from $11.8 million in the second quarter of 2007. Advanta reported a net credit loss rate of 8.38% of managed receivables, a 30-day delinquency rate of 5.67% and a 90-day delinquency rate of 2.81%. "We take no comfort from it, but our losses and delinquencies are below the average of other small-business issuers," Dennis Alter, Advanta chairman and CEO, said this morning during a conference call with securities analysts. Operating expenses during the quarter increased 19%, to $81.6 million from $68.6 million a year earlier. Net interest income from its Business Cards segment increased slightly, to $25.5 million from $25.4 million. "The quarter's results are obviously not what we would like to see," Alter said. "All of us at the company are focused on returning to robust earnings and returns for our shareholders." Advanta added an estimated 26,000 customers during the quarter, and cardholder transaction volume during the quarter totaled $3.5 billion, of which almost 90% related to merchandise sales activity. Last week, Advanta said it expects to incur $6 million to $6.5 million in expenses for severance and other costs related to the outsourcing of jobs. The issuer in May said that with profits from small-business credit card issuance down sharply because of credit woes, it would join the ranks of its larger competitors in shipping some jobs overseas to India. It will use Genpact, a former General Electric Co. subsidiary that is now its own publicly traded company, in shipping jobs offshore. Operations affected most by the job cuts include information technology, customer service, collections, and accounting and finance. Advanta expects the move to save $15 million annually, beginning in 2010.
Authoritative analysis and perspective for every segment of the payments industry
Authoritative analysis and perspective for every segment of the industry
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