Portfolio Supply Remains Low, But Higher Default Rates are on the Horizon: PRA Group CEO

Decreasing supply of portfolios available to be purchased led to a marked drop in the amount of portfolio purchases by PRA Group in the first quarter of 2022, according to financials released by the company yesterday, while company Chief Executive Kevin Stephenson noted that, “if history teaches us a simple lesson, more is coming,” during a conference call with analysts.

Overall, the company reported net income of $39.97 million during the first three months of 2022, compared with $58.4 million during the same period last year. Total revenue for the first quarter was $240 million, compared with $289 million a year ago.

Stephenson talked about the investments that the company has made in recent years in building out its digital collection operation, saying that cash collected per hour has doubled from $139 per collector hour in 2019 to $261 per collector hour in 2022.

“We continuously look for ways to improve our predictive scoring models, test new data sources and improve our legal and outbound calling strategies,” Stephenson said. “Several specific items are driving this improvement. In the US, our digital platform continues to drive collections that are a significant part of total collections.”

Stephenson attributed the decrease in portfolio supply to lower default and delinquency levels during the pandemic. The company expects the volume of non-performing loans to increase and that means more portfolios and accounts that will be available to be purchased by the end of this year. Credit card issuers, for example, are noting that the balances being carried by consumers are rising, which is often an indicator of financial trouble on the horizon.

“We’ve been in business since 1996,” Stephenson said. “We’ve seen cycles come and cycles go. Supply is certainly not where we’d like to see it today, but it will return.”

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