Introduction
Non-bank consumer lenders are financial companies (excluding traditional deposit-taking banks) whose core business is providing consumer credit. Examples include credit card issuers, specialty finance firms, and consumer loan companies like American Express, Discover Financial Services, Bread Financial (formerly Alliance Data Systems), OneMain Holdings, Credit Acceptance Corp, etc.
This report compares the performance of these publicly traded U.S. non-bank consumer lending companies across major economic recessions in the past 20 years.
Specifically, we examine:
- Stock Price Changes during recessionary periods (e.g., the 2008–2009 financial crisis and the brief COVID-19 recession in 2020).
- Revenue Stability during those same periods, analysing whether their top-line revenues grew or contracted significantly and how volatile their revenues were.
- Loan Loss Provisions for non-performing loans and their impact on the net income.
The goal is to determine whether these consumer lenders exhibited defensive characteristics (e.g., resilient stock prices or stable revenues) during downturns.
We compile stock and revenue trends using publicly available financial data (annual reports, Macrotrends, Yahoo Finance, FRED, etc.), supplemented by charts and tables for clarity.
Key Publicly Traded U.S. Consumer Lenders (Non-Banks)
Our analysis focuses on a representative set of U.S.-based, publicly traded non-bank consumer lenders whose core operations are consumer credit (credit cards, personal loans, auto loans, etc.). We exclude traditional banks and pure mortgage lenders.
The companies analysed include:
- American Express (AXP): Though often considered a bank holding company for regulatory purposes, its core business revolves around credit card lending and payment network operations (excluding traditional branch banking).
- Discover Financial Services (DFS): Issuer of Discover credit cards and provider of personal and student loans.
- Bread Financial Holdings (BFH): Formerly Alliance Data Systems (ADS), a provider of private-label credit cards and other lending, now rebranded as Bread Financial.
- OneMain Holdings (OMF): A leading personal instalment loan company focusing on subprime and near-prime borrowers, with a nationwide branch network for consumer finance.
- Credit Acceptance Corp (CACC): A specialty auto finance company focused on subprime auto lending, known for its consistent profitability across cycles.
We also considered other non-bank consumer lenders like Capital One (COF) and Synchrony Financial (SYF). However, Capital One is a bank holding company (with a large deposit base), and Synchrony (spun off from GE Capital) is similar to Bread Financial in private-label card lending. For clarity, our main comparison sticks to the five firms above.
Economic Recessions (2005–2025) and Analysis Periods
According to the National Bureau of Economic Research (NBER), the U.S. experienced these recessions in the past 20 years:
- Great Recession (Dec 2007 – June 2009): Sparked by the 2008 financial crisis, marked by severe credit losses and a broad stock market crash. We analyse 2007–2010 to capture the pre-peak and trough of this cycle.
- COVID-19 Recession (Feb 2020 – April 2020): A very sharp but short recession due to the pandemic, accompanied by a rapid stock market decline in March 2020 and a swift recovery thereafter. We analyse 2019–2021 to include the shock and rebound.
(Note: There was also a mild recession in 2001 and a very brief technical recession in early 2022, according to some accounts, but our focus is on 2008–09 and 2020, the most significant downturns in the last two decades.)
Below, we present two primary analyses: stock performance and revenue performance for each company during these recession periods, followed by a discussion on defensiveness.
Stock Price Performance During Recessions
To assess how “defensive” these consumer lending stocks have been, we review their stock price changes during the Great Recession (2008–09) and the COVID-19 recession (2020).
Defensive stocks would ideally fall less than the broader market or recover faster. The S&P 500 fell about 38% in 2008 and ~-34% in February–March 2020 (but ended 2020 up for the year).
Table 1. Stock Price Changes During Recessions (annual % total return):
*1 ADS was acquired by private equity (Blackstone) in late 2021 and renamed BFH, so 2021 shows partial year to acquisition at $81.75/share.
From Table 1, we observe:
- 2008–2009 (Financial Crisis):
All companies saw their stock prices plunge in 2008, significantly underperforming the market.
American Express fell by 64% in 2008 (worse than the S&P 500’s ~-38%).
Discover and Bread Financial (ADS) fell around -35% to -38% in 2008.
Interestingly, Credit Acceptance (CACC) fell slightly (-34% ) and soared by over +200% in 2009 as it remained profitable and investors scooped up shares.
In 2009, as the economy bottomed out, these stocks staged huge recoveries: AXP more than doubled, DFS +56%, ADS +39%, and CACC +207%. This indicates they behaved more like cyclical stocks (sharp drops in recession, big rebounds later) rather than defensives that hold steady. - 2020 (COVID Recession):
This recession was extremely sharp but brief. All these stocks cratered from mid-February to late-March 2020, then rebounded by year-end.
For example, AXP’s stock lost ~50% of its value from Jan to March 2020 (from ~$130 to ~$64 intrayear), but ended 2020 down just -1% after a recovery.
DFS had a similar pattern, plunging ~-70% intrayear to ~$23, then ending 2020 +10%.
OneMain (OMF) fell from ~$48 to ~$8 (-83% intrayear), then skyrocketed back to ~$30 by Dec, finishing +35% for 2020.
Bread Financial (ADS/BFH) and Credit Acceptance also fell ~60–65% by March 2020, then recovered, ending 2020 around -34% (ADS) and -22% (CACC) for the year.
Stocks gained strongly in 2021 as the recovery continued (e.g., CACC +99%[ 37†L45-L53**] %, AXP +37%, etc.).
Figure 1 below illustrates the relative stock trajectory of these companies through the COVID-19 recession, indexed to 100 in January 2020 = 100. The grey area denotes the official recession (Feb–Apr 2020). All stocks fell sharply to March lows, but most (AXP, DFS, OMF, CACC) fully recovered by Dec 2020, with OMF even exceeding its January level. Bread/ADS had a partial recovery. This underscores that these lenders are not “safe havens” during panics, but they did bounce back as stimulus and credit interventions took effect.
Stock Volatility & Drawdowns:
During recessions, these stocks often have steeper drawdowns than the overall market, reflecting the high-beta nature of consumer credit businesses.
For example, in 2008, American Express lost ~83% from peak to trough (pre-2008 high to early-2009 low), far worse than the S&P. In 2020, most fell more than the market’s ~34% drop. This suggests they are not defensive stocks regarding price stability during crises.
Instead, they behave cyclically, with downturns amplifying losses and upturns offering high rebounds.
Revenue Trends and Stability Through Recessions
Next, we examine the revenue stability of these companies during recessions.
Defensive businesses often have stable or growing revenues despite economic contractions (e.g., consumer staples see steady demand). For lenders, a recession usually means tighter credit supply and higher loan losses, which can reduce revenue (interest income, fees) or slow growth.
However, some lenders manage to maintain revenue via high interest yields or growth in balances as consumers borrow more.
Table 2. Annual Revenue and Growth During Recessions (in USD, billions):
*2 Bread/ADS’s 2020–2021 revenue drop reflects the mid-2021 spin-off of LoyaltyOne/BrandLoyalty, not just organic decline.
*3 OMF revenues from Yahoo Finance (approx $3.71B in 2019, $3.40B in 2020, $3.76B in 2021).
Key insights from Table 2:
- American Express:
Had robust revenue growth pre-2008 (+10% in 2007, +1.6% in 2008 ). In 2009, revenue fell by 14% as cardmember spending and loan volumes dropped amid the recession. (AXP also had major credit reserve builds impacting profit.)
Revenue rebounded +13% in 2010. During COVID, AXP’s revenue fell by 17% in 2020 due to a collapse in travel and consumer spending, but then surged by +19% in 2021 with stimulus-fueled spending.
Volatility: AXP’s top line is somewhat cyclical – sharp drops in recessions, substantial recoveries in expansions, not exactly “stable”.
- Discover (DFS):
Impressively, DFS’s revenue grew modestly in 2008 (+3.8%) and grew +8.9% in 2009 despite the recession. This likely reflects interest income resilience – during the crisis, high interest rates on card balances and personal loans kept revenue up even as new loan growth slowed.
DFS did see a slight -3.2% dip in 2020 (as consumers spent less and paid down balances early in the pandemic), but that was much smaller than AXP’s drop.
DFS’s revenue returned to growth in 2021.
Volatility: DFS has shown relatively stable and growing revenue through recessions, indicating a degree of defensiveness in its revenue model (perhaps due to a focus on interest yield over fees, and not being as travel-dependent as Amex). - Bread Financial (ADS/BFH):
Alliance Data’s revenue dipped slightly in 2008 (-4.5%) and 2009 (-4.0%). These modest declines suggest its private-label credit card and loyalty businesses were fairly resilient through the 2008–09 downturn.
During COVID, however, BFH/ADS saw a steep 19% revenue drop in 2020 as credit card sales at retail partners plummeted, and then another huge drop in 2021 due to corporate restructuring (sale of Epsilon marketing unit in 2019 and spinoff of Loyalty division in mid-2021).
Adjusting for those, core card revenue rebounded somewhat late in 2020 into 2021. Still, 2020’s decline was significant, reflecting its exposure to consumer spending reductions. - OneMain (OMF):
As a standalone public company (post-2013 IPO of Springleaf/OneMain), OMF wasn’t around in 2008. OneMain’s business model of personal loans funded by securitisation faced tests in 2020: originations fell by ~-13% in Q4 2020.
Revenues dipped ~-8% in 2020 (from ~$3.7B to $3.4B), but not a collapse. Charge-offs spiked but were cushioned by stimulus (many subprime borrowers paid down debt).
By 2021, revenues grew by +10% above 2019 levels as lending resumed. OMF’s revenue proved reasonably stable through COVID (single-digit decline), thanks to high net interest margins and its loan book’s fixed-rate yields. - Credit Acceptance (CACC):
Known for steady profitability, CACC’s revenue (interest and fees on subprime auto loans) grew through 2008–09 (CACC’s GAAP EPS grew +23% in 2008 and +113% in 2009).
CACC did not have a single unprofitable year even in the crisis – its unique “dealer forward flow” program means it earns even on delinquent loans via collections. We don’t have the exact 2007–09 revenue here, but net income rose strongly, implying stable or growing revenue.
In 2020, CACC’s interest revenue dipped only slightly (~-8% estimated) as fewer people bought cars during lockdowns, but then hit record highs by 2021–2022 as used car demand surged.
Volatility: CACC’s revenue and earnings appear the least volatile – it is almost an “all-weather” lender that prices loans to maintain profitability across cycles.
Summary of Revenue Stability: Among these firms, Discover and Credit Acceptance demonstrated the best revenue stability through recessions, even managing growth or minimal declines.
American Express and Bread Financial had notable revenue contractions in crisis periods (reflecting their sensitivity to consumer spending levels), while OneMain had a moderate dip in 2020.
Figure 2 charts the revenue trajectories of American Express vs. Discover around the Great Recession and COVID recession, illustrating their different patterns: AXP’s revenue dropped sharply in 2009 and 2020, whereas DFS’s revenue was steadier (slight uptick in 2009, mild dip in 2020).
Defensive or Cyclical? – Discussion
A “defensive investment” typically means a stock that is relatively immune to economic downturns – either its price remains stable (low beta) or its business fundamentals (revenue, earnings) are resilient.
Based on the above:
- Stock Behaviour:
These consumer lenders did not have defensive stock performance. They amplified the market’s moves, falling more in bad times and rallying more in good times.
For example, AXP and DFS had larger drawdowns than the market in 2008 and 2020, reflecting credit risk concerns.
The only partial exception is that Credit Acceptance (CACC) has been somewhat decorrelated at times because it continued to perform well fundamentally, and its stock rose strongly after the 2008 crash and again post-2020.
However, even CACC fell initially during panic selling. So, as equities, none can be considered safe-haven defensive stocks during recessions; they are cyclical financial stocks. - Revenue/Earnings Stability:
There are some defensive characteristics on the business side.
Discover and Credit Acceptance maintained surprisingly stable (even growing) revenues through the Great Recession. This hints that their lending models (high interest yields, subprime niches) can generate income despite high charge-offs, possibly by charging more or growing loan balances as competitors pull back.
However, American Express and Bread/ADS are more sensitive to consumer spending; they saw double-digit revenue drops when consumers cut back.
OneMain was somewhat in between – its 2020 revenue dip was moderate, aided by government stimulus propping up loan performance. - Credit Losses vs. Revenue:
It’s worth noting that revenue stability doesn’t equal profit stability.
All these lenders had surging credit loss provisions in recessions (AXP’s losses doubled in 2008, OneMain and Discover also built large reserves in 2020).
So even if revenue held, net income often plunged or turned into losses, which hurt stock prices.
For instance, AXP had to cut costs and lay off 10% of staff in 2008. Sallie Mae (student lender) nearly went bankrupt in 2008 without government support. This systemic risk exposure means investors dump these stocks in downturns despite revenue resilience, due to the fear of defaults.
Overall Assessment: Non-bank consumer lenders cannot traditionally be classified as defensive investments.
Their stock prices tend to be volatile and strongly tied to credit cycles. Only in terms of revenue did a few show relative stability (DFS, CACC) by continuing to generate income during recessions. But even those had to navigate higher loan losses.
From an investor perspective, these firms are more cyclical – they suffer in recessions but often rebound powerfully after.
They might be attractive for contrarian investors during downturns (given low valuations and eventual recovery, e.g., AXP post-2008, or OMF at $8 in 2020). Still, they do not protect capital well during the downturn itself.
Credit Loss Provisions in the Great Recession (2008–2011)
The 2008 financial crisis triggered dramatic increases in loan loss provisions across consumer lenders as unemployment spiked and delinquencies soared. Table 1 summarises the surge in provisions relative to loan portfolio size for key lenders and the corresponding hit to earnings:
Table 1. Loan Loss Provisions vs. Loan Portfolios – 2007 vs 2009 (Great Recession)
¹ Loan receivables on balance sheet (CACC’s managed loan exposure is higher; its unique dealer-participation model makes direct ratio comparison difficult).
Key observations:
In 2009, Capital One’s provision expense more than doubled from pre-crisis levels, reaching roughly $5.1 billion (about 3–4% of loans, up from ~1–2% in 2007).
Capital One had predicted $5.6B of loan losses for 2008 but ended up with $6.4B, and projected $8.6B for 2009. This spike in credit costs pushed Capital One from a $1.6B profit in 2007 to a slight net loss in 2008 (–$0.1B). By 2009, its net income was a modest +$0.3B, even after trimming expenses and adding revenue streams.
Discover – primarily a credit card lender in 2008 – saw its managed net charge-off rate jump from 3.8% in 2007 to ~8.5% by late 2009 Accordingly, Discover’s annual loss provisions grew ~140% (from ~$0.55B in 2007 to ~$1.3B in 2009), consuming a considerable share of earnings.
Discover remained technically profitable through 2008–09 only thanks to one-time gains: e.g. a $297M antitrust settlement in 2009 boosted results.
Excluding such items, DFS’s core earnings nearly fell to zero in 2009, down from about $0.6B in 2007.
Specialty finance companies fared similarly.
Credit Acceptance Corp (CACC), a subprime auto lender, had a high provision-to-loan ratio even in good times (~8–10%).
During 2008–09, its provisions ticked up with rising defaults, but CACC’s model (which shares risk with auto dealers and recognises finance income over time) kept it profitable throughout the recession.
CACC’s GAAP net income grew from $54.9M in 2007 to ~$80–100M by 2009, increasing despite the downturn. This consistency reflects a defensively structured business, although its provision ratio was ~10+%, those losses were priced into its revenue model.
By contrast, OneMain Financial (then a unit of AIG) and other instalment lenders saw severe credit deterioration.
While exact 2008 data for OneMain isn’t public, industry proxies indicate subprime personal loan charge-off rates climbing into the low teens (10–15%).
AIG’s consumer finance arm reportedly incurred heavy losses, contributing to AIG’s woes and prompting OneMain’s sale in 2010.
In short, all lenders had to build reserves in 2008–09 massively, but those with higher-risk portfolios (e.g. subprime personal or card loans) built the most, relative to their assets.
Net Income Impact and Recovery (2008–2011)
Given the provision spikes above, net income plunged for most lenders during 2008–09.
Capital One’s earnings swung from a $1.5B profit in 2007 to effectively breakeven by 2009.
Discover’s core profitability evaporated in 2009 (reported $1.3B net, including one-offs ).
Synchrony did not exist separately, but GE Capital’s retail card unit recorded losses that dragged on GE.
OneMain’s parent, AIG, reported billions in consumer finance credit losses.
Yet, recovery began quickly once provisions peaked. As the economy bottomed in 2009 and began to improve in 2010, provision expenses started falling – in some cases dramatically – leading to a swift rebound in net income.
Capital One, for example, saw net income jump to $2.7B in 2010 (from $320M in 2009), as provision expense fell by roughly half and credit card charge-offs eased. By 2011, Capital One earned over $3.5B – comfortably above pre-crisis levels – aided by acquisitions and normalising credit costs.
Discover also bounced back: from only ~$0.1B underlying profit in 2009 to $765M in 2010 and $2.2B in 2011, an all-time high during that period.
This V-shaped earnings recovery was typical once lenders released excess reserves and loan growth resumed.
Crucially, the speed of earnings recovery correlated with the magnitude of reserve releases post-crisis. Lenders that “over-provisioned” in 2008–2009 could release reserves in 2010–2011, boosting earnings above normal levels.
Discover, for instance, had built a large allowance by late 2009 and then benefited from reserve releases as credit performance surprised to the upside in 2010; its provision for loan losses declined 42% in 2010 vs 2009, directly lifting net income.
On the other hand, those that were under-reserved or had structural issues recovered more slowly.
However, most in this peer group had returned to strong profitability by 2010.
Credit Acceptance again was an outlier – since its earnings never fell much, there was less “slingshot” effect, but it steadily grew profits through the recession and after (net income up ~300% from 2007 to 2012).
In summary, the Great Recession saw provision expenses multiply 2–3x, wiping out earnings in 2008–09, but as those provisions proved sufficient, net incomes snapped back by 2010.
Companies entered 2008 with healthy pre-provision earnings, which, combined with government support (e.g. Capital One took $3.6B TARP capital ), allowed them to absorb credit losses and quickly rebound.
COVID-19 Recession (2020) and Rapid Recovery (2021–2022)
The brief 2020 COVID-induced recession led to another spike in loan loss provisioning, albeit with some crucial differences.
New accounting rules (CECL) required front-loading of expected losses, so provisions spiked immediately in early 2020 even before actual defaults occurred.
Meanwhile, unprecedented fiscal stimulus and forbearance programs kept consumer defaults unusually low. This resulted in record-high reserve builds in 2020, followed by significant releases in 2021, producing a whipsaw in reported earnings. Table 2 details 2019 vs 2020 provisions and the proportion of loan portfolios:
Table 2. Loan Loss Provisions vs. Loan Portfolios – 2019 vs 2020 (COVID-19 Recession)
Estimates are based on company filings and analyst reports; 2020 provisions include the large CECL reserve builds for expected pandemic losses.
Despite the surge in provisions, actual charge-off rates in 2020 remained subdued for many lenders due to relief programs.
For example, Discover’s net charge-off rate on credit cards was 3.2% in Q3 2020, lower than 3.5% a year prior, thanks to forbearance and stimulus checks, even as it built reserves for an expected future spike.
Similar patterns occurred at Capital One and Synchrony – provisions ballooned in Q1–Q2 2020 (Capital One added ~$5.4B to reserves in Q1 alone ), but delinquencies fell through mid-2020.
OneMain’s experience highlights this dynamic. In Q1 2020, OneMain took a $530M provision (up 92% YoY), anticipating severe losses.
Yet, government stimulus bolstered its subprime borrowers; by Q4 2020, OneMain’s provision was only $130M, down 55% YoY, as credit performance far outperformed expectations.
For the full year of 2020, OneMain’s provision expense ended at just 17% higher than that of 2019, and the company remained profitable with a net income of $730M (vs. $770M in 2019).
In short, lenders entered 2020 bracing for Great Depression-level losses, but massive intervention prevented that scenario. They effectively “over-provisioned” relative to realised losses, setting the stage for a profit surge in 2021.
Net Income Impact and Recovery (2020–2022)
The COVID shock caused a sharp one-year drop in profits, followed by a swift rebound.
Thanks to the heavy upfront provisions under CECL, most lenders reported much lower (or even negative) net income in the first half of 2020.
Still, as it became clear by late 2020 that catastrophic losses wouldn’t materialise, earnings recovered quickly.
- Capital One’s net income fell by ~50% from $5.53B in 2019 to $2.72B in 2020.
After its massive reserve build, the company posted a $1.3B loss in Q1 2020, but returned to profitability by Q3 and Q4 (e.g. $2.6B profit in Q4). In 2021, as reserves were released, Capital One’s earnings exploded to $12.4B – its highest ever, and ~4.5× 2020’s level.
By 2022, net income normalised to $7.36B, still above pre-pandemic. In effect, 2020’s “lost” earnings were recovered and accounted for in 2021. - Discover Financial followed a similar trajectory.
Its net income dropped ~62% to $1.1B in 2020 (it even booked a $61M net loss in Q1 2020 ), then rebounded to $5.3B in 2021 – an all-time record, fueled by reserve releases and roaring loan growth.
By 2022, DFS earned $4.2B, well above 2019’s $2.9B. Notably, Discover’s Q2 2020 provision was $1.7B (40% higher YoY) while net income was only $48M; a year later in Q2 2021, provision swung negative (net reserve release) and Discover earned $1.7B in that quarter alone. - Synchrony Financial’s profit was hit harder proportionally in 2020, given its focus on store credit cards (which carry higher loss rates).
SYF’s net earnings plunged ~63% from $3.75B in 2019 to ~$1.4B in 2020. In Q2 2020, Synchrony barely broke even at $48M profit after adding $1.7B to reserves for pandemic losses.
However, like its peers, Synchrony saw a swift rebound: 2021 net income jumped to roughly $4.0–4.5B (SYF reported $1.1B in Q4 2021 alone ), aided by $1+ billion of reserve releases and a revival in consumer spending.
By late 2021, Synchrony’s credit metrics had improved so that it released most of its COVID reserves, and its ROE hit record highs. - As noted, OneMain weathered 2020 with only a modest profit dip.
After $730M net income in 2020, OneMain earned $1.3B in 2021, nearly doubling due to reserve releases and robust loan demand for unsecured personal loans.
OneMain also instituted outsized dividends in 2021, effectively distributing excess capital that had been socked away for losses that never came.
By 2022, its credit costs remained below pre-pandemic norms, illustrating how extraordinary stimulus flipped the script for subprime lenders.
In aggregate, 2020 was a one-year earnings interruption – painful but short-lived.
Massive provisions drove steep profit declines in early 2020, but those provisions proved more than sufficient.
As stimulus-fueled consumers kept paying their bills, lenders rapidly reversed allowances into income in 2021, leading to record profitability in many cases.
The contrast with 2008–09 is stark: instead of a multi-year credit downturn, the consumer credit cycle in 2020–21 was highly compressed.
Net charge-offs began to rise in 2021 as stimulus waned, but lenders were releasing the cushion built in 2020 by then.
Provision Scaling vs. Loan Growth
A key metric of defensiveness is how proportionately a lender must increase provisions relative to its loan portfolio. In both recessions, all lenders saw provisions rise much faster than loan growth (which was often negative). But some managed to keep provision-to-loan ratios lower than others:
- Capital One:
In 2008–09, COF’s provisions roughly tripled while its loan portfolio was flat – provision/loans rose ~2× (from ~2–3% to ~5–6%).
In 2020, COF’s loans were roughly flat again (slight contraction) while provisions doubled (~1.5% to ~3.8% of loans per Table 2).
Relative scaling: Capital One’s credit costs rose significantly, but not out of line given its mix; it benefits from diversification (auto loans had lower loss rates than credit cards, diluting the ratio). - Discover:
As a pure-play card lender in 2008–09, Discover’s provision/loan ratio roughly doubled (from ~4% to ~8%).
In 2020, it jumped similarly, from ~3.3% to ~6% (loans flat). DFS thus scales provisions almost one-for-one with deterioration in card credit, a largely proportional scaling relative to portfolio risk.
The flipside is a strong earnings snapback when losses abate. - Synchrony:
This store-card specialist typically carries higher baseline loss rates (provisions ~5% of loans in 2019).
In 2020, SYF’s ratio spiked to ~8–9%. The stimulus muted that 1.7× increase – many expected far worse.
Still, Synchrony had the highest credit cost ratio among peers in the pandemic, reflecting its subprime-heavy receivables (e.g. retail credit card charge-offs are higher even in normal times).
It required a larger relative reserve build, and its 2020 ROA fell more than others, highlighting less defensiveness. - OneMain:
Being entirely subprime, OneMain always has high provision ratios (~7% of loans).
In 2020, it increased to ~8%, a mild increase thanks to government aid to its borrowers. OMF’s provision scaled less severely than feared – only +17% YoY – demonstrating the surprising resilience of instalment loan performance under unprecedented policy support.
Compared to 2008–09 (when subprime finance charge-offs doubled industry-wide), OneMain’s 2020 experience was far more benign. - Credit Acceptance:
CACC’s provisioning is unique, but one could note its allowance builds were also hefty under CECL in 2020 (it added ~$100M more than usual, which is significant on a small base).
Yet CACC’s economics remained steady, with adjusted net income up in 2020 vs. 2019.
This underscores a high level of inherent defensiveness—its business model had effectively “pre-provisioned” for losses via conservative accounting and risk-sharing with dealers.
Pace of Net Income Recovery
Across the board, net incomes rebounded faster post-2020 than post-2008.
The Great Recession saw peak losses in 2009 and a recovery by 2010–2011 (roughly 2 years to restore earnings).
In contrast, the COVID recession saw earnings dip in 2020 and fully recover in 2021 within one year.
This ultrafast recovery was due to the exceptional factors discussed (reserve overshoot and stimulus). It highlights that the “defensiveness” of these lenders’ earnings has improved in some respects, thanks to stronger capital and reserve positions entering 2020 versus 2008.
For example, Capital One took until 2012 to consistently exceed its 2007 profit level, whereas it blew past its 2019 profit in 2021.
Discover’s 2009 profit was a fraction of 2006–07 levels and only hit new highs in 2011–2012; by contrast, its 2020 dip was entirely erased by 2021’s new record earnings.
Synchrony (launched in 2014) experienced its first downturn in 2020 and came out with record profits in 2021.
OneMain grew stronger – its 2021 earnings were its best on record, far above 2019.
From a stock perspective, this rapid earnings recovery translated to quick stock price rebounds in 2020–21 (whereas after 2008, many financial stocks lagged for years).
In sum, post-2020 recovery was much quicker than post-2008, underlining how aggressive loss provisioning and external support can shorten the economic pain of a recession.
Kilde’s investment strategy response to the recession risks
Kilde’s 2025 recession strategy centres on lending only to non‑bank financial corporations (NBFCs) that already manage portfolios above US $100 million and carry demonstrably thick capital cushions.
Rating‑agency work on the 2020‑24 cycle shows that industry consolidation has funnelled market share to a handful of very large U.S. originators; Fitch notes these lenders weather shocks better precisely because scale gives them diversified funding and equity headroom to absorb elevated provisions, allowing production (and valuations) to rebound quickly once the downturn troughs.
Size alone, however, is not enough.
Past crises have highlighted how currency mismatches can swamp big balance sheets when local revenues must service hard‑currency liabilities.
Empirical work for the Centre for Economic Policy Research finds that firms relying heavily on foreign‑currency borrowing suffer outsized stress during sudden‑stop episodes and depreciations, prompting calls for tighter macro‑prudential limits.
Kilde therefore imposes strict caps on the share of FX‑denominated debt in any borrower’s funding mix and discounts collateral that is not naturally dollar‑hedged.
At the same time, we have lifted our minimum debt‑service‑coverage‑ratio (DSCR) hurdle — moving, for example, from 1.25× to 1.40× on unsecured exposures — because lenders and investors increasingly treat DSCR as the first line of defence against cash‑flow volatility in uncertain macro conditions.
Operational resilience is just as important as financial structure.
Surveys show that in an uncertain macro environment, 67 % of businesses pivot from growth‑at‑all‑costs to customer‑retention strategies, recognising that predictable repeat usage underpins profitability when acquisition budgets are cut.
NBFCs with extensive, recurring customer franchises and a clear value proposition enter recessions with steadier inflows and lower delinquency risk — traits that help them meet the tougher DSCR threshold above and make them attractive counterparties for Kilde.
Finally, bank behaviour amplifies the opportunity.
The Federal Reserve’s Senior Loan Officer Survey and the ECB’s April 2025 lending survey both document another round of tightening in corporate‑credit standards, even as demand begins to recover.
When mainstream lenders pull back, prime and near‑prime borrowers shift towards the better‑capitalised NBFCs that still have the capacity to lend; by partnering with those scale players, Kilde locks in higher‑quality risk at wider spreads just as the cycle turns.
These measures — focusing on well‑capitalised, FX‑disciplined, cash‑generative NBFCs that benefit from customer stickiness and bank retrenchment — position Kilde’s portfolio to withstand the downturn and capture early‑cycle upside when recovery starts.
Conclusion
Non-bank consumer lenders are inherently cyclical, but the past two downturns show important nuances in their defensiveness.
In both recessions, loan loss provisions spiked relative to portfolios – a clear stress test of risk management. While it hit hard, lenders like Capital One and Discover demonstrated an ability to absorb outsized credit losses and bounce back within a couple of years, supported by diversified revenue and prudent reserving.
Others with a more niche focus (Synchrony’s retail cards, OneMain’s subprime loans) saw bigger relative swings, yet even they survived 2020 with surprising resilience thanks to the extraordinary policy response.
Meanwhile, Credit Acceptance’s consistent profitability through 2008–09 stands out, illustrating that business model matters as much as loan mix for defensiveness.
When evaluating these companies’ performance, Provision-to-loan ratios tell the story of credit stress – doubling (or more) in severe recessions – while net income trajectories reveal how quickly they heal.
The 2008 crisis dealt a heavy blow, but by 2010–2011, most had regained their footing. The 2020 shock, though sharp, was largely recuperated by 2021.
Stock prices reflected these cycles, plunging during panic but recovering as losses abated. Revenue streams remained comparatively stable, as core lending franchises persisted even in downturns, which helped generate pre-provision earnings to offset losses.
While non-bank consumer lenders are not immune to recessions, the top players have shown considerable resilience.
They enter downturns with strong capital and profit buffers, scale their loss provisions to maintain reserve coverage (even if it means a short-term earnings hit), and emerge leaner but ready to grow.
The immediate years after recessions often see outsized gains as provisions normalise – a pattern seen in 2010–11 and 2021–22.
For investors and analysts, this comparative history underscores that the “defensiveness” of these lenders is relative: no profits are truly safe in a severe credit cycle.
However, prudent provisioning and robust pre-provision earnings power have enabled rapid recoveries for most.
The past 20 years suggest that even in worst-case scenarios, these franchises can navigate the storm and earn at new highs a few years later.
The differentiation lies in how steep the valley (e.g., did they incur a loss?) and how quickly the rebound occurs. These are key aspects of defensiveness where specific models (like Credit Acceptance’s) have excelled.
Kilde is focusing new lending to large non‑bank financial corporations with portfolios above US $100 million, ample capital buffers, low reliance on foreign‑currency funding, and stronger debt‑service‑coverage ratios, because evidence from recent cycles shows that scale, equity headroom, and disciplined liability management let such lenders absorb recession‑era loan losses and rebound quickly; coupled with sticky customer bases that cushion cashflows and the influx of prime borrowers shut out by tightening bank standards, these traits make well‑capitalised NBFCs the safest and most profitable counterparties for Kilde as the downturn unfolds.
Sources:
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- Macrotrends. n.d.-a. “OneMain Holdings Net Income 2010–2024 (OMF).” Macrotrends. Accessed April 20, 2025.
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- National Bureau of Economic Research (NBER). 2023. “US Business Cycle Expansions and Contractions.” NBER (data last updated March 14, 2023). Accessed April 20, 2025.
- Navient Corporation. 2021. Annual Report (Form 10-K) for the Fiscal Year Ended December 31, 2020. Wilmington, DE: Navient Corp. (filed February 25, 2021).
- Newmyer, Tory, Aaron Gregg, and Jaclyn Peiser. 2023. “Delinquencies Rise for Credit Cards and Auto Loans, and It Could Get Worse.” The Washington Post, August 30, 2023.
- OneMain Holdings, Inc. 2020. “Second Quarter 2020 Earnings Conference Call Transcript.” July 28, 2020. Transcript via The Motley Fool.
- OneMain Holdings, Inc. 2021. Annual Report (Form 10-K) for the Fiscal Year Ended December 31, 2020. Washington, DC: U.S. Securities and Exchange Commission (filed February 24, 2021).
- Schroeder, Pete. 2020. “U.S. Bank Profits Plunge 70% on Coronavirus Loss Provisioning.” Reuters, June 17, 2020.
- SLM Corporation (Sallie Mae). 2009. Annual Report (Form 10-K) for the Fiscal Year Ended December 31, 2008. Reston, VA: SLM Corporation (filed February 27, 2009).
- SLM Corporation (Sallie Mae). 2020. Third Quarter 2020 Investor Presentation. Newark, DE: SLM Corporation.
- Tanzi, Alex. 2025. “US Consumer Debt Delinquency Hits Highest in Almost Five Years.” Bloomberg News, February 13, 2025.
- Tracy, Matt. 2023. “Tough Road Ahead for U.S. Fintech Lenders as Default Risk Rises.” Reuters, January 13, 2023.
- Wilchins, Dan. 2008. “Sallie Mae Posts Quarterly Net Loss.” Reuters, October 22, 2008.
- World Acceptance Corporation. 2009. 2009 Annual Report & Form 10-K (Fiscal year ended March 31, 2009). Greenville, SC: World Acceptance Corp.
- Yahoo Finance. 2025a. “OneMain Holdings, Inc. (OMF) Stock Price, News, Quote & History.” Yahoo Finance. Accessed April 20, 2025.
- Yahoo Finance. 2025b. “Navient Corporation (NAVI) Stock Price, News, Quote & History.” Yahoo Finance. Accessed April 20, 2025.
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