Spec Fin Weekly

Research evidence excerpt

Spec Fin Weekly

Our Consumer Finance coverage ended up 3.4% wk/wk for the week, with the markets being more risk-on for consumer

lending. However, there were many headline cross-currents. Fintechs led the outperformance in our coverage, up >10% wk/wk,

followed by the subprime consumer names. On the other side, it was the pawn shops FirstCash and EZCorp that led the lower

names, down 3% and 8% wk/wk respectively.SPECIALTY From this, one can intuit that the market became risk-on for consumer lending, as pawn shops tend to be counter-cyclical while

fintechs and subprime stocks are pro-cyclical. There was much focus on lower gas prices being better for the consumer and for AI-

intensive (i.e. fintech) focused names. Indeed locally, we've seen prices per gallon drop 30c-40c midweek as hopes for a resolution

on oil shipping through the Strait of Hormuz.FINANCE Still, there were many headline cross currents last week. In addition to potential resolution of oil shipping, we received much

bearish feedback following a WSJ article headlining credit card delinquencies. We also received mixed feedback following banks'

commentary at a competitor financials conference last week.

On the WSJ Headline: Pay attention to Debt Service Ratios: While the credit card delinquency and card balance numbers look

scary, it doesn't represent a new trend or a spike in existing trends, and therefore the numbers from the WSJ don't come as aINDUSTRY surprise for most financials investors. Importantly, as our BTIG financials and fintech desk specialist colleague Mike Turner points

out, these headline numbers don't look scary when compared to incomes.

Looking at multiple charts, including consumer credit vs. personal income, the financials obligations ratio (as a % of after-tax