CPS Reports Drop in Revenue, Earnings While Originations Rise

Consumer Portfolio Services greets guests at the 2017 NADA Convention & Expo. (Photo by Auto Finance News)

Consumer Portfolio Services reported decreases in revenue and earnings for its third quarter ended September 30. The finance company reported income of $3.2 million on revenue of $95.6 million in the just-ended three month period. In the same quarter last year, the company generated a profit of $4.7 million on revenue of $109.5 million.

However, the company’s earnings beat analysts estimates, according to Jefferies. In addition, origination volumes and operating costs improved, according to the third quarter earnings release.

CPS originated $225.2 million during the quarter, up 10% compared with $204.7 million the prior-year period. Outstandings were down slightly, totaling $2.34 billion compared with $2.35 billion last year.

The lender has made improvements to lower its operating expenses this quarter as well. Total operating expenses for the third quarter were $90.9 million compared with $101.4 million for the 2017 period.

Additionally, CPS priced its third-quarter securitization at the second-tightest spreads over the benchmarks since 2011, Charles Bradley, chief executive, said in the earnings release. The latest issuance adds positivity to CPS’ portfolio and indicates “continued high demand for our securitization bonds,” Bradley said.

The lender’s third securitization of the year is backed by $168.8 million in auto loan receivables, and this latest issuance features “significant changes” from the company’s earlier notes, according to a presale report from S&P Global Ratings. The changes include boosting its credit quality.

“It’s true that we have gradually made a shift to the upper tier of our product mix,” Jeffrey Fritz, executive vice president, and chief financial officer of CPS, previously told Auto Finance News. “Part of that is we’ve given some pricing advantages to the dealer for lower LTV loans, and for newer vehicles and that has tended to shift the mix in our credit spectrum toward the upper tier.”

Additionally, delinquencies greater than 30 days past due were 11.58% of the total portfolio — an increase compared with 10.27% in the comparable quarter last year. Net charge-offs were 8.03% of the average portfolio up from 7.96% last year.

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