Release Date: April 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Capital generation increased by 25% year over year, reaching $194 million.
- C&I adjusted earnings per share rose by 19% to $1.72.
- Receivables grew by 12% year over year, contributing to a 10% increase in total revenue.
- Originations increased by 20%, driven by high-quality customer acquisition and product innovation.
- Positive credit trends continued, with a decrease in delinquencies and net charge-offs, indicating improved credit performance.
Negative Points
- The macroeconomic environment remains uncertain, posing potential risks to future performance.
- Interest expense increased by $35 million compared to the previous year, due to higher average debt and cost of funds.
- The credit card net charge-off rate remains high at 19.8%, although it is expected to stabilize in the long term.
- The application for an industrial loan company (ILC) is pending, with no guarantee of approval, which could impact strategic plans.
- Operating expenses increased by 11% year over year, partly due to the inclusion of foresight expenses.
Q & A Highlights
Q: Can you expand on the benefits of the ILC and its impact on market expansion?
A: Doug Shulman, Chairman and CEO, explained that the ILC, if approved, would enhance their strategy by allowing them to serve more customers through a unified nationwide rate structure. This would enable pricing for risk in states with rate caps. It would also simplify their operating model and provide access to deposit funding, diversifying their balance sheet. The ILC would allow them to issue their own credit cards without becoming a bank holding company, avoiding additional capital implications.
Q: What is driving the better performance in late-stage delinquencies?
A: Jenny Osterhout, CFO, noted modest improvements in delinquency to charge-off rolls, which is encouraging. While there is some noise from the newer auto product, trends are better than typical for consumer loans excluding foresight. The positive trend is also seen in cards, although it's a newer book. They are monitoring closely and believe it could help achieve the lower end of their guidance range.
Q: How should we expect the reserve ratio to move if strong credit trends continue?
A: Jenny Osterhout stated that the reserve ratio is driven by current book performance, delinquency direction, recoveries, and credit mix. The growing credit card portfolio puts pressure on reserves, while the auto portfolio helps reduce it. Given current uncertainty, they will wait to see how it plays out before adjusting reserves.
Q: What factors will influence the decision to accelerate growth in new products like auto and card?
A: Doug Shulman emphasized macro uncertainty as a key factor. They are solidifying platforms, integrating technology, and building credit models. There is no specific indicator for growth acceleration, but steady credit performance and resolution of inflation-driven credit cycles will guide their decision.
Q: What is the outlook for recoveries and their impact on charge-off rates?
A: Jenny Osterhout highlighted strong recovery performance, with $88 million in recoveries this quarter, including $12 million from post-charge-off debt sales. This is in line with the previous year. The focus is on maximizing internal versus external collections, and they expect similar recovery trends moving forward.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
