Advanta's 1Q profit slips 14 percent on bad credit
SPRING HOUSE, Pa.—Advanta Corp.'s profit slipped 14 percent in the first quarter as bad credit ate into the credit card lender's portfolio, the company said Wednesday.
Advanta earned $18.4 million, or 44 cents per share, in the first quarter, compared with profit of $21.4 million, or 48 cents per share, in the first quarter last year.
The lender collected $46 million in interest on its loans, and profit from lending shrank 31 percent to $17.9 million.
The lender's customers have been repaying their loans less reliably. The company set aside $28.4 million to cover bad loans, almost triple the reserve in last year's first quarter. Advanta is writing off about 6.5 percent of its loans a year at this rate, 65 percent higher than the rate this time last year.
The company's profit in the first quarter was helped by an $11.7 million gain on its stake in Visa Inc., the credit-card network that went public this year. Advanta issues loans through credit cards branded MasterCard and Visa.
Advanta added about 67,000 customers and lent $3.4 billion through its credit cards.
"We are managing the business diligently through this down cycle, with the goal of minimizing risk and improving our results," Chief Executive Dennis Alter said in a statement.
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