Ally Financial has sold its credit card business to Cardworks, a company that specializes in consumer finance.
As part of the mentioned deal, Cardworks and its subsidiary Merrick Bank acquired Ally’s credit card portfolio worth $2.3 billion in credit card receivables and 1.3 million active cardholders. The relevant information is contained in the Ally press release, which was published on Wednesday, January 22. Michael Rhodes, the company’s chief executive officer, said that the decision to sell the credit card business is part of a broader strategy aimed at adopting a more focused approach that allows the firm to simplify and streamline its structure, prioritize core businesses, and drive improved returns. It was also noted that Ally is proud of the results generated by the business over the past three years and is pleased with the terms of the agreement and the opportunity to continue growing with CardWorks. Michael Rhodes stated that embarking on the next chapter, the company remains focused on doing the right thing for its customers, communities, employees, and shareholders.
CardWorks chief executive officer Dan Pillemer noted that the mentioned acquisition was an exciting step in the expansion of the firm’s near-prime credit card business.
It is worth noting that the deal became known two weeks after the news that Ally laid off just under 5% of its staff, stopped mortgage originations, and re-examined its credit card business. In September, the value of the company’s shares fell by double digits. The corresponding dynamic of the mentioned indicator was recorded after Ally’s management stated that the pressure faced by the firm’s borrowers was leading todel inquencies and driving up charge-offs across its loans. The company’s chief financial officer Russell Hutchinson said in September that borrowers are struggling with high inflation and the cost of living, and a weakening employment picture. In October, he warned analysts that the next few quarters would be for Ally choppy.
The mentioned company stated that it had instituted tougher standards for borrowers by putting in place stricter verification requirements for providing income and employment.
At the same time, other lenders are reporting increased credit card spending. For example, the JPMorgan Chase earnings report for the fourth quarter of 2024 contains information according to which consumer spending continues to be on a growth trajectory. It was also noted in this case that the use of credit and debit cards by the bank’s customers has increased. JPMorgan Chase chief executive officer Jamie Dimon said the United States economy has been resilient. He noted that unemployment remains relatively low and consumer spending stayed healthy, including during the holiday season.
Capital One’s earnings report also contains information about continuing the dynamic of card spending growth. In this case, it was noted that purchase volumes increased by 7%, amounting to $172.9 billion. It is worth clarifying that the data for the fourth quarter of 2024 is implied.
