NEW YORK, Feb. 4, 2014 (GLOBE NEWSWIRE) -- Based on an analysis of the trends suggested by its new Payments Expectations (PE) Index, Auriemma Consulting Group (ACG) expects 2014 to be a year of increasing strength. ACG has combined four key performance measures into one index designed to measure and forecast the health of the credit card industry. The newly launched PE Index frames current period profitability relative to historical norms, and layers in several factors impacting industry growth and profitability, including the effect of consumer confidence and payment needs, changes in credit risk dynamics, and the degree to which regulatory policy impedes (or enables) the industry. Although profitability data is from public sources, the remaining inputs are sourced from proprietary ACG research.
The PE Index is a product of ACG's leadership and deep roots in the payments space. Having represented multiple constituencies such as banks/issuers, networks, processors, regulators, investors, and other companies in the payments "ecosystem," ACG is well aware of the prominence of the credit card business. Although these groups all have a vested interest in this sector, until now they have not had an easy way to track the "health" of the industry.
John Costa, Managing Director of Corporate Finance at ACG, says: "As long time industry participants, we have always shared our view about the trends in the industry, disruptive technologies, regulatory changes and evolutionary developments. We are excited about our product as a quantitative measure informing our macro view of the industry. At the moment, the PE Index supports our contention that this is a great time to be long card assets."
A graph accompanying this release is available at http://media.globenewswire.com/cache/25650/file/24437.pdf
This graph displays the PE Index for the past two years, along with the individual component which measures credit risk change and a line which represents the aggregate average outstanding receivables (shown as a percentage of $1 trillion). Although the industry in aggregate has shown negligible growth over the past two years, we believe this understates the health of the credit card industry. We anticipate strong performance as a result of the continued benign loss rate environment. Our credit risk measure is based on ACG proprietary roll rate analysis and signals increasing or decreasing credit risk. In the measure shown on the graph, the upward slope of the line indicates improvement in credit to a 100 maximum value.
ACG believes that the credit card industry has weathered the turbulence of the great recession and is now in a remarkably profitable period. The long term trends since the end of the recession have been very positive; historically low cost of funds have joined falling loan loss levels, while portfolio yields have remained "sticky." Beyond the card issuers, the networks and processors have similarly enjoyed a very profitable period.
About Auriemma Consulting Group and the PE Index
Auriemma Consulting Group (ACG) is a boutique management consulting firm with specialized focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients' business activities across a broad set of industry topics and disciplines.
Complementary to our core consulting business, ACG facilitates a series of Industry Roundtable groups focused on a variety of industries in which clients exchange information through activities managed by ACG, comparing and analyzing industry practices and benchmarks so that each member can optimize its own performance. Founded in 1984, ACG has grown from a one-man shop to a more than 35-person firm with offices in New York and London.
The PE Index is based on ACG research and is informed by both public and proprietary data.
For more information, contact John Costa at (212) 323-7000 or john.costa@acg.net.
