Credit card profit plummets at Advanta

Posted: May 01, 2008

Advanta Corp. yesterday reported a steep decline in profit from its small-business credit cards in the first quarter, as the slumping economy caused more borrowers to fall behind in their payments.

Even so, the Spring House company's class B shares jumped 16.45 percent, or $1.24, to $8.78 in Nasdaq trading yesterday because the earnings were better than expected.

Advanta said its credit card operation earned $6.67 million in the first quarter, off sharply from $21.17 million in the same period a year earlier.

Overall, Advanta earned $18.36 million in the quarter, including a $13.8 million gain from the public offering of Visa Inc. shares. Advanta was among the banks that owned the credit card company. In the first quarter a year earlier, its profit was $21.4 million.

The combined earnings per share for Advanta's class A and class B shares were 44 cents in the first quarter, down from 48 cents a year earlier.

"This is a very difficult environment," Dennis Alter, Advanta's chairman and chief executive officer, said in a conference call with analysts. "Consumer delinquencies are at levels not seen in two decades."

The company boosted its provision for loan losses to $28.38 million in the first three months of 2008 from $10.08 million in the same period a year earlier.

The amount of debt 30 days or more delinquent was $332.11 million, or 5.3 percent of all receivables, the company said. A year earlier, those figures were $150.97 million and 2.7 percent.

To save an estimated $15 million a year starting late next year, Alter said Advanta would move offshore "significant portions" of certain operations. The company did not immediately provide detail on job losses here.

Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.

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