PRA Profit Climbs as European Recoveries Lift Revenue
Estimated remaining collections reached a record $8.9 billion after a European portfolio reforecast.
PRA Group (PRAA), the buyer and collector of nonperforming loans, reported a 36.7% increase in second-quarter profit as higher expected recoveries from European portfolios lifted revenue. Net income attributable to PRA rose to $57.9 million, or $1.51 a diluted share, from $42.4 million, or $1.08 a share, a year earlier.
The European reforecast changed the quarter’s trajectory as cash-collection growth slowed. Total collections rose 4.2% to $558.5 million, easing from 11% growth in the first quarter and roughly 14% in each of the final two quarters of 2024. Changes in expected recoveries increased to $96.9 million from $33.3 million a year earlier after a review added about $349 million to estimated European collections, reflecting more than six years of cash overperformance.
Total revenue rose 29.4% to $372.2 million, and operating income increased 80.1% to $153.3 million. Portfolio income grew 6.7% to $267.8 million, slowing from 11.9% growth in the first quarter, while total portfolio revenue climbed 28.3% to $364.7 million as the recovery adjustment flowed through results.
Collection growth remained concentrated in the company’s core businesses. U.S. Core collections increased 6.2% to $269.7 million, while Europe Core rose 8% to $200.4 million. Europe Insolvency collections fell 28.2% to $17.7 million.
Operating expenses increased 8.1% to $218.9 million as legal collection costs rose $14.9 million to support future collections. Lower compensation, benefits and communication costs partly offset that increase. PRA also recorded $5 million of U.S. reorganization costs tied to headcount reductions and call-center consolidation.
Portfolio purchases rebounded 34.3% from the first quarter to $296.6 million, while remaining 14.4% below the year-earlier period. Investment shifted toward Europe Core, where purchases nearly doubled sequentially to $164.6 million, as U.S. Core purchases declined to $90.2 million. Borrowings rose to $3.759 billion, contributing to an increase in interest expense to $64.4 million.
PRA expects higher portfolio-income levels following the European review, with more moderate changes in expected recoveries over the longer term. The company repurchased $10 million of shares during the quarter and authorized a new program covering up to $150 million, without a stated expiration date.