maz

Discover Financial: Quite Solid Results, All Things Considered

To make sense of the loan loss provisions when comparing to the 8.39% net charge-off rate you need to use the loan loss provisions on total managed loans as the charge-off rate is calculated on that basis

$381m is the loan loss provision for owned loans for the quarter. Including managed loans the figure is $924.4m for the quarter.

For the last twelve months owned loan provisions are around $2.6 to $2.7 billion so the lower figure for this month might indicate conservative reserving in prior quarters. Managed basis loan loss provisions are around $4.5 billion over the last 12 months

That figures to be about right. Managed loans are $51 billion and relatively unchanged throughout the period. $4.5b/$51b works out to around 8.82% - a tad higher than the 8.39% charge-off rate. Of course the two are not entirely comparable because of timing but it's a reasonable indicator that the company is adequately reserved if they are expecting charge-offs to rise to 8.5 to 9.0% in the next quarter.

The press release said the quarter's loan loss provisions were UP $873 from last year and down $154 million from the previous. Provisions for the quarter alone were $924 million and the balance sheet had

Credit Card Issuers and Processors - How They're Faring in the Crisis

DFS & AXP access to TARP funds has less to do with debts piling up - managed loans outstanding at both companies has been roughly static over the last year & you can expect them to come down over the next year or so imo - certainly not "pile-up". The bigger problem for both companies has been liquidity as the ABS market for credit card loans virtually shut-down or became prohibitively expensive. DFS is doing a good job financing maturing ABS out of increased customer deposits but that has a big negative to earnings - first the IO strip associated with the ABS has to get written down and reserves have to be increased as the loans are now on the balance sheet. Combined with rising defaults we can see earnings depressed (negative) for the next year.

If FAS 140 eventually (2010) makes credit card companies take ABS on the balance sheet that will be a big event - $20 billion for DFS and $29b for AXP - the write-downs and additional reserving required will make both companies look poor and challenge Tier 1 capital adequacy - that's why you see lot's of cash on the books as both companies are in defensive mode & quite rightly so. If it doesn't happen then both companies will look really good on a Tier 1 capital basis - currently 17.1% for DFS. If the ABS were on the balance sheet that figure would be around 8.5 to 9%

2009's House of Pain: Consumer Loans and Credit Card Debt

I can sympathize with any card holder that has their rate raised from a flat single digit interest to prime + 10.99%, especially if they have relatively high FICO and always pay on time.

However, most of these low rates came about in times of a) really low funding rates for cc companies; b) really charge-off rates by consumers; and c) some insanely low rates to attract new business.

With average charge off rates heading for 10% and funding costs increasing it is not surprising that single digit interest and teaser rates will be a thing of the past.

These companies have to survive & their barely doing it at present

11 Stocks Selling Below Cash

Give me a break!

Financial institutions don't "own" all the cash on the balance sheet

Looks like someone ran a screen and did no research at all

Not sure how this got approved to run on seekingalpha

Winners and Losers from the Mortgage Mess

Poorly researched article full of careless errors - since when were MBIA and Ambac mortgage insurers? How about the largest mortgage insurer MGIC Investment (MTG) and PMI Group (PMI)?

I could go on but this article isn't worth it

It's plain Rong :-)