The credit cycle is officially transitioning and opportunities to purchase portfolios of delinquent and charged off debts are starting to increase, the chief executive of Encore Capital Group said yesterday during a call with analysts to discuss the company’s financial performance for the fourth quarter of 2022 as well as for the entire year.
For the fourth quarter, Encore announced revenue of $233 million, down from $357 million in the same quarter of 2021, and a net loss of $73 million, compared with net income of $76 million during the last three months of 2021. For the full year, revenue was $1.4 billion, compared with $1.6 billion in 2021, while net income was $195 million, compared with $351 million a year earlier.
Encore started ramping up its purchases of debt portfolios in the fourth quarter, spending $225 million, compared with $183 million during the same period of 2021.
“After more than two years of reduced market supply, increased lending by U.S. banks and rising delinquencies have led to the beginning of a transition in the U.S. credit cycle, in which opportunities to deploy capital at strong returns are now steadily rising,” said Ashish Masih, Encore’s CEO.
Masih said that the company expects its Midland Credit Management unit to purchase $200 million of portfolios in the first quarter of 2023, which would be more than double what the unit purchased during the first three months of last year.
Overall, the company collected $1.9 billion from consumers in 2022, 17% lower than the $2.3 billion it collected in 2021. Collections for the fourth quarter were down 16%, to $436 million.
