DFS » Topics » Net Charge-offs

This excerpt taken from the DFS 10-Q filed Apr 8, 2009.

Net Charge-offs

Our net charge-offs include the principal amount of losses charged off less principal recoveries and exclude charged-off interest and fees, recoveries of interest and fees and fraud losses. Charged-off and recovered interest and fees are recorded in interest and loan fee income for loan receivables and in securitization income for securitized loans while fraud losses are recorded in other expense. Credit card loans are charged off at the end of the month during which an account becomes 180 days contractually past due, except in the case of cardmember bankruptcies and probate accounts. Cardmember bankruptcies and probate accounts are charged off at the end of

 

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the month 60 days following the receipt of notification of the bankruptcy or death but not later than the 180-day contractual time frame. The net charge-off rate is calculated by dividing net charge-offs for the period by the average loan receivables for the period.

The following table presents amounts and rates of net charge-offs of loan receivables (dollars in thousands):

 

     For the Three Months Ended  
     February 28, 2009     February 29, 2008  
     $    %     $    %  

Net charge-offs

   $ 433,456    6.34 %   $ 205,179    3.83 %

The net charge-off rate on our loan receivables increased 251 basis points for the three months ended February 28, 2009 compared to the three months ended February 29, 2008. The higher net charge-off rate was due to higher delinquencies beginning in the fourth quarter of 2008, reflecting the weakening economic environment as a result of rising unemployment, declining housing prices and the decrease in the availability of consumer credit, as well as an increase in bankruptcy-related charge-offs.

This excerpt taken from the DFS 10-K filed Jan 28, 2009.

Net Charge-offs

Our net charge-offs include the principal amount of losses charged off less principal recoveries and exclude charged-off interest and fees, recoveries of interest and fees and fraud losses. Charged-off and recovered interest and fees are recorded in interest and loan fee income for loan receivables and in securitization income for securitized loans while fraud losses are recorded in other expense. Credit card loans are charged off at the end of the month during which an account becomes 180 days contractually past due, except in the case of cardmember bankruptcies and probate accounts. Cardmember bankruptcies and probate accounts are charged off at the end of the month 60 days following the receipt of notification of the bankruptcy or death but not later than the 180-day contractual time frame. The net charge-off rate is calculated by dividing net charge-offs for the period by the average loan receivables for the period.

The following table presents amounts and rates of net charge-offs of loan receivables (dollars in thousands):

 

    For the Years Ended November 30,  
    2008     2007     2006     2005     2004  
    $   %     $   %     $   %     $   %     $   %  

Net charge-offs

  $ 980,955   4.59 %   $ 677,879   3.40 %   $ 698,570   3.63 %   $ 930,537   4.93 %   $ 946,363   5.71 %

The net charge-off rate on our loan receivables increased 119 basis points for the year ended November 30, 2008 compared to November 30, 2007. The higher net charge-off rate was due to higher delinquencies beginning in the fourth quarter of 2007, reflecting the weakening economic environment as a result of rising unemployment, declining housing prices and the decrease in the availability of consumer credit, as well as an increase in bankruptcy-related charge-offs.

 

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The net charge-off rate on loan receivables declined 23 basis points for the year ended November 30, 2007 as compared to the year ended November 30, 2006. This decline reflected a continued lower level of bankruptcy- related charge-offs following the October 2005 effective date of the new U.S. bankruptcy legislation, offset in part by a higher level of contractual charge-offs. The bankruptcy legislation, which made it more difficult for individuals to declare bankruptcy, resulted in a surge in bankruptcy receipts and related charge-offs in 2005 and early 2006. Accordingly, the year ended November 30, 2006 was adversely impacted by an elevated level of charge-offs in the first quarter.

This excerpt taken from the DFS 10-Q filed Oct 9, 2008.

Net Charge-offs

Our net charge-offs include the principal amount of losses charged off less current period principal recoveries and exclude charged-off interest and fees, current period recoveries of interest and fees and fraud losses. Charged-off and recovered interest and fees are recorded in interest and loan fee income for loan receivables and in securitization income for securitized loans while fraud losses are recorded in other expense. Credit card loans are charged off at the end of the month during which an account becomes 180 days contractually past due, except in the case of cardmember bankruptcies and probate accounts. Cardmember bankruptcies and probate accounts are charged off at the end of the month 60 days following the receipt of notification of the bankruptcy or death but not later than the 180-day contractual time frame. The net charge-off rate is calculated by dividing net charge-offs for the period by the average loan receivables for the period.

 

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The following table presents amounts and rates of net charge-offs of loan receivables (dollars in thousands):

 

     For the Three Months Ended
August 31,
    For the Nine Months Ended
August 31,
 
     2008     2007     2008     2007  

Net charge-offs

   $   251,844    4.76 %   $   161,070    3.23 %   $   681,595    4.36 %   $   512,160    3.39 %

The net charge-off rate on our loan receivables increased 153 basis points and 97 basis points for the three and nine months ended August 31, 2008, respectively, as compared to the respective prior year periods. The higher net charge-off rate in both periods was due to higher delinquencies beginning in the fourth quarter of 2007, reflecting the weakening economic environment, the declining U.S. housing markets and mortgage industry and an increase in bankruptcy-related charge-offs.

This excerpt taken from the DFS 10-Q filed Jul 10, 2008.

Net Charge-offs

Our net charge-offs include the principal amount of losses charged off less current period principal recoveries and exclude charged-off interest and fees, current period recoveries of interest and fees and fraud losses. Charged-off and recovered interest and fees are recorded in interest and loan fee income for loan receivables and in securitization income for securitized loans while fraud losses are recorded in other expense. Credit card loans are charged off at the end of the month during which an account becomes 180 days contractually past due, except in the case of cardmember bankruptcies and probate accounts. Cardmember bankruptcies and probate accounts are charged off at the end of the month 60 days following the receipt of notification of the bankruptcy or death but not later than the 180-day contractual time frame. The net charge-off rate is calculated by dividing net charge-offs for the period by the average loan receivables for the period.

The following table presents amounts and rates of net charge-offs of loan receivables (dollars in thousands):

 

     For the Three Months Ended
May 31,
    For the Six Months Ended
May 31,
 
     2008     2007     2008     2007  

Net charge-offs

   $   224,572    4.49 %   $   163,147    3.47 %   $   429,751    4.15 %   $   351,090    3.47 %

 

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The net charge-off rate on our loan receivables increased 102 basis points and 68 basis points for the three and six months ended May 31, 2008, respectively, as compared to the respective prior year periods. The higher net charge-off rate in both periods was due to higher delinquencies beginning in the fourth quarter of 2007, reflecting the weakening economic environment, the downturns in the U.S. housing markets and mortgage industry and an increase in bankruptcy-related charge-offs.

This excerpt taken from the DFS 10-Q filed Apr 14, 2008.

Net Charge-offs

Our net charge-offs include the principal amount of losses charged-off less current period principal recoveries and exclude charged-off interest and fees, current period recoveries of interest and fees and fraud losses. Charged-off and recovered interest and fees are recorded in interest and loan fee income for loan receivables and in securitization income for securitized loans while fraud losses are recorded in other expense. Credit card loans are charged-off at the end of the month during which an account becomes 180 days contractually past due, except in the case of cardmember bankruptcies and probate accounts. Cardmember bankruptcies and probate accounts are charged-off at the end of the month 60 days following the receipt of notification of the bankruptcy or death but not later than the 180-day contractual time frame. The net charge-off rate is calculated by dividing net charge-offs for the period by the average loan receivables for the period.

The following table presents amounts and rates of net charge-offs of loan receivables (dollars in thousands):

 

     For the Three Months Ended  
     February 29, 2008     February 28, 2007  
     $    %     $    %  

Net charge-offs

   $  205,179    3.83 %   $  187,941    3.47 %

The net charge-off rate on our loan receivables increased 36 basis points for the three months ended February 29, 2008 as compared to the three months ended February 28, 2007. The higher net charge-off rate was due to higher delinquencies beginning in the fourth quarter of 2007 reflecting the weakening economic environment, the U.S. housing and mortgage issues and an increase in bankruptcy-related charge-offs.

This excerpt taken from the DFS 10-Q filed Oct 12, 2007.

Net Charge-offs

Our net charge-offs include the principal amount of losses charged-off less current period principal recoveries and exclude charged-off interest and fees, current period recoveries of interest and fees and fraud losses. Charged-off and recovered interest and fees are recorded in interest and loan fee income for loan receivables and in securitization income for securitized loans while fraud losses are recorded in other expense. Credit card loans are charged-off at the end of the month during which an account becomes 180 days contractually past due, except in the case of cardmember bankruptcies and probate accounts. Cardmember bankruptcies and probate accounts are charged-off at the end of the month 60 days following the receipt of notification of the bankruptcy or death but not later than the 180-day contractual time frame. The net charge-off rate is calculated by dividing net charge-offs for the period by the average loans for the period.

The following table presents amounts and rates of net charge-offs of loan receivables (dollars in thousands):

 

     For the Three Months Ended
August 31,
    For the Nine Months Ended
August 31,
 
     2007     2006     2007     2006  
     $    %     $    %     $    %     $    %  

Net Charge-Offs:

                    

Domestic

   $ 161,070    3.25 %   $ 157,230    3.18 %   $ 512,158    3.39 %   $ 516,469    3.62 %

International

     49,060    6.71 %     43,535    6.31 %     141,214    6.51 %     87,407    4.62 %
                                    

Total

   $ 210,130    3.70 %   $ 200,765    3.56 %   $ 653,372    3.78 %   $ 603,876    3.73 %
                                    

For the three months ended August 31, 2007, the net charge-off rate on our loan receivables increased 14 basis points as compared to the three months ended August 31, 2006, reflecting higher net charge-offs on both the domestic and international loan receivables. The net charge-off rate on the loan receivables for the nine

 

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months ended August 31, 2007 was 5 basis points higher than the nine months ended August 31, 2006 as improvement in domestic net charge-off rates was offset by less favorable trends in the international net charge-off rates.

The net charge-off rate on domestic loan receivables increased 7 basis points for the three months ended August 31, 2007, as compared to the three months ended August 31, 2006, reflecting a trend toward more normalized levels of bankruptcy charge-offs as compared to the low levels observed in the three months ended August 31, 2006, following the effective date of the new U.S. bankruptcy legislation. In contrast, the net charge-off rate on domestic loan receivables in the nine months ended August 31, 2007 was 23 basis points lower than the nine months ended August 31, 2006. This was due to an elevated level of charge-offs for the nine months ended August 31, 2006, as a result of the initial acceleration of bankruptcy charge-offs immediately following the new U.S. bankruptcy legislation being included in the first quarter of 2006, offset only in part by the record low levels of bankruptcy charge-offs observed in the subsequent months.

The net charge-off rate on international loan receivables increased 40 basis points and 189 basis points for the three months and nine months ended August 31, 2007, respectively, as compared to the prior year respective periods. These increases were due to the legislative changes in the United Kingdom that have led to increased bankruptcy and individual voluntary arrangement filings and a general deterioration in consumer credit quality in the United Kingdom and the implementation of higher minimum payment requirements on certain accounts. In addition, charge-offs related to the Goldfish portfolio were significantly lower for the nine months ended August 31, 2006 as no late stage delinquencies were purchased under the terms of the acquisition in February 2006.

This excerpt taken from the DFS 10-Q filed Jul 12, 2007.

Net Charge-offs

Our net charge-offs include the principal amount of losses charged-off less current period principal recoveries and exclude charged-off interest and fees, current period recoveries of interest and fees and fraud losses. Charged-off and recovered interest and fees are recorded in interest and loan fee income for loan receivables and in securitization income for securitized loans while fraud losses are recorded in other expense. Credit card loans are charged-off at the end of the month during which an account becomes 180 days contractually past due, except in the case of cardmember bankruptcies and probate accounts. Cardmember bankruptcies and probate accounts are charged-off at the end of the month 60 days following the receipt of notification of the bankruptcy or death but not later than the 180-day contractual time frame. The net charge-off rate is calculated by dividing net charge-offs for the period by the average loans for the period.

The following table presents amounts and rates of net charge-offs of loan receivables (dollars in thousands):

 

    For the Three Months Ended
May 31,
    For the Six Months Ended
May 31,
 
    2007     2006     2007     2006  
    $   %     $   %     $   %     $    %  

Net Charge-Offs

                

Domestic

  $ 163,147   3.49 %   $ 125,811   2.91 %   $ 351,088   3.46 %   $ 359,239    3.85 %

International

    46,238   6.52 %     24,374   3.73 %     92,154   6.40 %     43,872    3.65 %
                                

Total

  $ 209,385   3.89 %   $ 150,185   3.02 %   $ 443,242   3.83 %   $ 403,111    3.83 %
                                

For the three months ended May 31, 2007, the net charge-off rate on our loan receivables increased 87 basis points as compared to the three months ended May 31, 2006, reflecting higher net charge-offs on both the domestic and international loan receivables. The net charge-off rate on the loan receivables for the six months ended May 31, 2007 was unchanged from the six months ended May 31, 2006 as improvement in domestic net charge-off rates was offset by less favorable trends in the international net charge-off rates.

The net charge-off rate on domestic loan receivables increased 58 basis points for the three months ended May 31, 2007, as compared to the three months ended May 31, 2006, reflecting a trend toward more normalized

 

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levels of bankruptcy charge-offs as compared to record low levels observed in the three months ended May 31, 2006, following the effective date of the new U.S. bankruptcy legislation. In contrast, the net charge-off rate on domestic loan receivables in the six months ended May 31, 2007, was 39 basis points lower than the six months ended May 31, 2006. This was due to an elevated level of charge-offs for the six months ended May 31, 2006, as a result of the initial acceleration of bankruptcy charge-offs immediately following the new U.S. bankruptcy legislation being included in the first quarter of 2006, offset only in part by the record low levels of bankruptcy charge-offs observed in the months following this heightened level.

The net charge-off rate on international loan receivables increased 279 basis points for the three months ended May 31, 2007 as compared to the three months ended May 31, 2006 and increased 275 basis points for the six months ended May 31, 2007 as compared to the six months ended May 31, 2006. These increases were due to the legislative changes in the United Kingdom that have led to increased bankruptcy and individual voluntary arrangement filings and a general deterioration in consumer credit quality in the United Kingdom. In addition, charge-offs related to the Goldfish portfolio were significantly lower for the three months and six months ended May 31, 2006 as no late stage delinquencies were purchased under the terms of the acquisition in February 2006.

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