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Monday, October 20, 2008
Small-business barometer: Advanta loan loss at "all-time highs"

    "Delinquencies and default rates rose to all-time highs, reflecting... the deteriorating credit performance of small businesses," according to September data for small-business loans used as collateral for Advanta Corp. securities, analyst Scott Valentin of Friedman Billings Ramsey & Co. Inc. told clients in a note.

   Defaults rose to 11.02% of Advanta's loan trusts, from 4.76% a year ago. Loss rates typically rise when the economy slows, not just because more people can't pay their bills, but also because small businesses stop expanding, so there are fewer new loans that haven't had time to go bad yet keeping the loss rate down.

   The Spring House company isn't in serious danger -- "Advanta's liquidity and capital position can sustain the company" -- but financing costs will likely rise, the company won't be profitable until at least the second half of next year, and it should consider cutting its dividend, Valentin added. 

   Spokesman David Goodman said the company had no comment, pending its third-quarter earnings report Oct. 30. Despite weak credit markets, "we're in very good shape," CFO Philip Brown told analysts at a July 29 conference call, citing Advanta's cash and capital. Advanta Class B common stock has been trading below $4 a share, down from the one-year high of $27.33.

Posted by Joseph N. DiStefano @ 3:20 PM  Permalink | Post a comment
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About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column, which is printed in the business pages of The Philadelphia Inquirer every Sunday, Tuesday, Wednesday, Thursday and Friday. Joe has worked at the Inquirer, mostly, since 1988. He has also written for Bloomberg and Gannett, authored the book Comcasted, majored in economics at Penn, and fathered six children. Reach Joe at 215-854-5194 and JoeD@phillynews.com

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