The good times keep rolling at Encore Capital Group, which reported a 58% jump in new income for the third quarter of 2024, compared with the same quarter last year, driven by its Midland Credit Management (MCM) operation, which continues to capitalize on record levels of charged-off debt available for purchase.
Why it matters: The surge in U.S. charged-off debt and increased lending are creating unprecedented opportunities for debt buyers and collection agencies, signaling a significant shift in the credit and collections landscape.
By the numbers:
- Net income: $31 million for the third quarter of 2024, up 58% from $19.6 million in the same period last year.
- Earnings per share: $1.26 in the third quarter, a 59% increase from $0.79 in 2023.
- U.S. portfolio purchases: Increased by 28% to $230 million compared to Q3 2023.
- U.S. collections: Rose by 22% to the highest level since 2021.
The big picture: The U.S. credit market is experiencing the highest charge-off rates in over a decade, combined with growing consumer lending. This environment is generating a record supply of non-performing loans (NPLs) for purchase.
- Market dynamics: Higher lending and rising charge-offs are providing ample opportunities for collection agencies to acquire debt portfolios at attractive prices.
What they’re saying:
- Ashish Masih, President and CEO of Encore Capital: “Amid these favorable market conditions, MCM continues to deliver on this robust opportunity. We are observing not only continued strong growth in U.S. market supply but attractive pricing as well.”
Between the lines: Encore is prioritizing capital allocation toward purchasing portfolios in the U.S., where returns are highest, over strategic mergers and acquisitions.
- Q4 expectations: The company expects fourth-quarter purchasing to be around $400 million, driven by continued strong activity in the U.S. and a significant spot purchase in Europe.
- Collections growth: Year-over-year collections growth is expected to be approximately 15%, surpassing $2.125 billion, an increase of over $250 million from last year.
