Commenting on PayPal’s (PYPL) announcement that it had reached a multi-year agreement where KKR (KKR) funds will be able purchase up to EUR 40B of Buy Now, Pay Later loans from the company, Wolfe Research analyst Darrin Peller notes that the externalization of the company’s BNPL portfolio was already discussed and contemplated in its 2023 guidance for both operating margins and EPS. The firm believes the move to externalize certain aspects of the credit book makes sense, as it will free up capital that PayPal would have otherwise had to allocate towards provisioning for its BNPL book. Overall, Wolfe is constructive on this move given it improves the overall credit risk profile of the company while also freeing up ongoing capital requirements otherwise needed to fund the loans. The firm has a Peer Perform on the shares.
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