I do not hold PNC, and never have, so it is not worth my while...

I do not hold PNC, and never have, so it is not worth my while to understand its accounting practices. I only today checked this PNC subforum, and the CLH subforum, to get a feel for the debt-collecting sector, because I am working on a share valuation exercise for CCP.

A superficial look at the H1 Report tempts me to think that PNC values its Purchase Debtors Portfolios (PDPs) at fair value on acquistion. Thus, if PNC buys PDPs with a face value of $100,000 for $20,000, and it considers the portfolio is worth $30,000, it records a $10,000 profit up front – the natural corollary of the increased valuation in the Balance Sheet, unless the credit entry is made to some sort of suspense account in the Balance Sheet. Maybe I have derived an incorrect conclusion on this. I did not spend much time looking.

What I also found odd from fleetingly reading CCP's accounts is that I expected to see in the Revenue accounts a line called PDP Liquidations and thereafter a cost called PDP Amortisation, or words to that effect, of somewhere between 40% and 50% of the Liquidation value. The equivalent cost in PNC's accounts was much lower than 40%.

Relative to CCP, PNC may recognise profit earlier, and perhaps too early, which could explain why PNC's profits in earlier years looked relatively good. I am not an accountant, I have not carefully studied PNC's accounts, and neither do I know how CCP values its PDP in its Balance Sheet, but I suspect CCP is biased towards understating the Balance Sheet value, at least initially, but perhaps always, and this has the effect of delaying profit recognition for a few years. This, unfortunately, makes the reported accounts of the two firms incomparable, or at least, not easily comparable.

Further, why would a collections business have seasonality? Perhaps because PDP purchasing is seasonal, but if it were, the PDP Liquidations that were the significant factor, then the seasonality would be minor. If PNC books part of the profit on PDP acquisition, that could be a reason. I do nor recall that CCP has a significant seasonal bias, but maybe it does.

On paying less for PDPs now than in earlier years, perhaps PNC paid too much earlier. When PNC was buying, CCP was saying that the prices were too elevated to meet its profitability hurdles, and it slowed its tempo of PDP purchasing.