Analysts Challenge CPS Amid 2Q Portfolio Decline | Auto Finance News | Auto Finance News

Analysts Challenge CPS Amid 2Q Portfolio Decline

  • Nicole Casperson
  • July 26, 2018
  • Earnings

Consumer Portfolio Services greets guests at the 2017 NADA Convention & Expo. (Photo by William Hoffman)

Consumer Portfolio Services’ revenue decreased 10% year-over-year to $99.4 million during the second quarter as a result of lower origination volumes and higher operating costs, Jeff Fritz, chief financial officer, said during an earnings call. 

CPS originated $215 million during the quarter compared with $234 million the prior-year period  Outstandings were down slightly as well, totaling $2.32 billion compared with $2.34 billion last year.

With revenue and originations down, an analyst on the earnings call questioned the lender for its lack of cutting costs.

“Your operating expenses are up 4%,” John Rowan, Director at Janney Montgomery Scott, said. “Why not cut costs in this environment because obviously your net income and everything is down pretty substantially year-over-year?”

However, CPS isn’t looking to cut employees or close one of their branches — despite admitting that both are the only two options to truly cut costs.

“People cost is the most expensive part of our business by far,” Charles Bradley, chief executive, said during the earnings call. “To close a branch would substantially hurt what we’re doing,” he added.

Additionally, delinquencies greater than 30 days past due were 10.07% of the total portfolio — an increase compared with 9.64% in Q217. Net charge-offs were 7.58% of the average portfolio down from 7.62% last year. 

“We think the market is very competitive,” Bradley said. “We want to make sure we are buying the best paper possible and continue to improve the trend in terms of what we buy.”

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