AmeriCredit Profit Drops

Loan-loss provisioning rises.
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Subprime auto lender

AmeriCredit

(ACF)

cut its earnings outlook for 2008 and said profit slumped 20% in the quarter amid rising loan loss provisions.

During the three months ended Sept. 30, the Fort Worth, Texas-based lender made $62 million, or 49 cents a share, compared to $74 million, or 54 cents a share, in the year-ago quarter.

Analysts expected the company would make 61 cents a share.

The company lowered its outlook for its fiscal 2008, which ends June 30. AmeriCredit expects profit to be in the range of $295 million to $320 million, with earnings in the range of $2.30 to 2.50 a share. The company had previously set a profit range of $320 million to $350 million, and an earnings range of $2.50 to $2.75 a share.

Origination volume is also expected to fall, it says. The company expects total originations in the range of $9 billion to $9.5 billion, down from its original estimates of $10 billion to $10.5 billion.

"While we saw normal seasonal credit deterioration during the September quarter, we also experienced weaker than expected results primarily from loans originated in 2006," said Dan Berce, AmeriCredit's president and chief executive. "As a result of this underperformance and a potentially softer economy in the near term, we have boosted the provision for loan losses for the quarter, which reduced our net income."

AmeriCredit's provision jumped 41% to $245 million in the quarter compared to the year-ago quarter.

The results include AmeriCredit's January acquisition of "near-prime" lender Long Beach Acceptance.

Analysts had long been predicting that consumer-finance industries including credit cards and auto loans would inevitably feel the pinch from the credit crunch.

Earlier this month, Stifel Nicolaus analyst Christopher Brendler downgraded AmeriCredit to a hold rating on concerns that the credit crunch was far from over.

"In our view," Brendler said at the time, stocks including AmeriCredit "underperform when credit worsens beyond expectations."

The company's managed receivables totaled $16.4 billion at the end of the quarter. Auto loan purchases rose 42% from a year earlier to $2.38 billion, AmeriCredit said.

Managed receivables that were 31-to-60 days delinquent were 5.5% of the portfolio, down from 6% a year earlier. Yet those loans more than 60 days overdue were 2.6% of the portfolio, slightly above those loans delinquent a year ago. Net charge-offs remained at 5.4% of average managed receivables for both the September 2007 quarter and the year-earlier quarter.

Shares closed on Wednesday down $1.08, or 6.3%, to $16.