BTIG downgrades Affirm, PROG Holdings on credit risks

Investing.com -- BTIG downgraded shares of Affirm and PROG Holdings ahead of second-quarter earnings, flagging concerns over weakening credit trends and increased competition from traditional lenders.

Brokerage upgraded Bread Financial and Synchrony Financial (NYSE: SYF) to Buy, and lifted Ally Financial (NYSE: ALLY) to Neutral from Sell given a more stable fundamentals and a shift in industry dynamics.

BTIG expects prime lenders to loosen underwriting standards after a period of conservatism, benefiting companies like Bread and Synchrony.

Both firms, it said, are using improved pricing power to expand credit access while maintaining risk-adjusted margins. That puts pressure on fintech and non-prime lenders such as Affirm and PROG, which BTIG now sees at a competitive disadvantage.

“Traditional prime point of sale finance providers will be taking more share across the credit spectrum,” analysts wrote, warning that Affirm and PROG could lose ground as risk appetite returns to the banking sector.

Despite some signs of resilience, BTIG remains cautious on the broader consumer backdrop. It said credit normalization at lenders has more to do with strict underwriting than improving household finances.

Consumers are increasingly leaning on credit cards to manage expenses, while payment rates have slipped.

The resumption of federal student loan payments also poses a drag.

About 45 million borrowers face monthly outlays of around $300, with nearly a third already delinquent.

Even if lenders say they’ve accounted for this, BTIG believes it remains a risk to both credit performance and spending growth.

While credit losses have stabilized in recent months, BTIG warned the outlook remains fragile. Wage growth is likely to slow, unemployment could rise, and tariff risks or AI-related disruptions could weigh further on household finances.

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