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AmeriCredit Seeing Seasonal Improvement

March 18, 2008

Despite the economic factors negatively impacting consumer credit, AmeriCredit is reporting seasonal improvement. Evidence of month-to-month improvement was seen in the company’s February credit data, which was released mid-March. This caused the company’s shares to jump, prompting some analysts to give the shares a “buy” rating.

In February, the company reported 31- to 60-day delinquencies at 6.26 percent, down from 7.67 percent in January. And 61-plus day delinquencies were low at 2.23 percent in February compared to the 3.09 percent reported in January.

“We would expect to see a seasonal trend in 2008 where our credit metrics will improve in March and again into the June quarter as consumers receive tax rebate payments, and also this year, the added benefit we believe for us, of having consumers receive the cash from the stimulus bill,” said Chris Choate, CFO of AmeriCredit, in a company Webcast.

Although delinquencies are improving month to month, they are still up from those reported during the same period in 2007.

“We are experiencing credit performance, as well as our competitors, that is weaker than we had seen throughout 2006 and the first part of 2007,” said Choate. “This is due to the consumer being under stress due to largely macroeconomic factors.”

Because of continued weak credit performance, the company has taken measures to control loss by tightening credit, reducing the number of producing dealers and reducing the originations infrastructure. Despite this, however, AmeriCredit plans on continuing to lend to a full spectrum of consumers.

“We intend to maintain a lower level of originations until the capital markets stabilize and the economic environment improves,” explained Choate. “However, we do intend to continue to offer a full spectrum of lending options to C dealers and dealer groups, which includes specialty-prime, near-prime and subprime loans.”

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