CompuCredit Upbeat Despite Increasing Chargeoffs

CompuCredit Corp. , a credit-card company whose stock price plunged when it reported third-quarter results, is seeing its chargeoff rates for bad loans increase but is not concerned about the stability of its customer base, a top executive said Thursday.

Rick Gilbert, vice chairman and chief operating officer, conceded that the Atlanta-based company, which markets bankcard and fee-based services to non-prime, underserved consumers, has “seen an increase in our loss rate,” but said it was not due to current economic conditions.

“That is to be expected in a business like ours where you're making new loans,” Gilbert told Reuters. “It takes a while for the portfolio to season.”

CompuCredit's stock tumbled in October when the company reported a higher-than-expected chargeoff rate and lower-than-expected revenue growth for the third quarter. In September, the company had raised its projections for 2001 earnings, sending its stock to new highs.

But after the earnings report, CompuCredit's stock plunged to around $29. In midday Nasdaq Stock Market trading on Thursday, the shares were up $1 at $18-1/4, down from their 52-week high of $66-1/16.

Moshe Orenbuch, an analyst at Credit Suisse First Boston, said he felt CompuCredit's stock fall was due more to the shortfall in revenue growth than chargeoff rates.

“I just think they hit a few potholes by raising the bar a little too high too early,” Orenbuch said.

Now, the company, which started operating in 1996 and went public in April 1999, faces a spate of shareholder lawsuits alleging that executives hid information about a substantial rise in bad loans during the third quarter.

Gilbert said the lawsuits “are meritless. We're not the least bit concerned about them.”

Still, Gilbert said the company was concerned about a slowdown in consumer spending. “That is the driver of the economy,” he said. “It can certainly have an impact on our business.”

Gilbert declined to comment on whether CompuCredit's fourth-quarter earnings would meet a First Call/Thomson Financial analyst consensus expectation of 53 cents a share. In 1999, the company had a fourth-quarter profit of $30.2 million, or 75 cents a share.

Orenbuch, the Credit Suisse analyst, said that despite the company's current woes, its underlying business is sound. He said CompuCredit was signing up more than 100,000 cardholders monthly. “There are very few players out there adding that many customers a month,” Orenbuch said.

“The fourth quarter will show CompuCredit's business model is intact,” Orenbuch said, adding that “whether they'll meet the estimates on every line of the income statement” remains to be seen.