Citigroup 3Q/02

Citigroup reported this morning that its North American card business produced $659 million in third quarter profits, an 18% increase over 3Q/02, as loss rates improved 62 basis points from the second quarter. North American card outstandings, including Diners Club, were up 4%, from $109 billion in 3Q/01 to $113 billion. US and Canadian outstandings grew 5% to $110.8 billion. Volume on North American cards hit $58.3 billion, a 6% gain over last year. However total, end-of-period open accounts for North America, declined 6% to 84.2 million. Citi’s charge-off rate came in at 6.14%, compared to 6.76% in the previous quarter, and 5.96% one year ago. Delinquency (90+ days) was up slightly since 2Q/02, from 1.84% to 1.88%. Globally, Citigroup made $849 million in card profits, a 21% gain. Citigroup also added $206 million to the loan loss reserve established in accordance with FFIEC guidance related to past due interest and late fees on the on-balance sheet credit card receivables offset by net gains recognized due to changes in estimates in the timing of revenue recognition on securitizations. For complete details on Citigroup’s 3Q/02 performance visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com

Online Bills

Jupiter Research predicts that by 2006, more than 50 million households will view bills online and 52 million households will pay at least one bill online. This represents a CAGR of 23% over 2001’s figure of 18 million U.S. households who viewed at least one bill online. Jupiter Research reports that while direct biller sites today account for 83% of bills viewed online, this will fall to 60% by 2006, with 40% of bills viewed at consolidators’ sites in 2006. Consumers who are interested in viewing and paying their bills in a single venue say they would prefer to do so at their primary banking provider’s site. This tendency increases among more experienced online users: 32% of users who have five or more years of online experience prefer a bank site compared with 23% of users who have been online for a year or less.

Household Response

Fitch Ratings has placed Household on “Rating Watch Negative” following its proposed settlement over bad sub-prime lending practices. The first charge, which could amount up to a sizeable $484 million pre-tax, is related to a proposed settlement between Household and state attorneys general and state banking regulatory agencies. This represents a nationwide resolution of issues related to Household’s real estate lending practices and the Household Finance Corp. and Beneficial Finance Corp.’s branch businesses. The second charge, expected to be taken in the fourth quarter of 2002, is related to the anticipated disposition of the assets and liabilities of Household’s thrift, Household Bank, FSB. The cost to Household for divesting the assets and liabilities could total between $250 million and $300 million after-tax.

TRANSAKT CERTIFICATION

Calgary-based Wildcard Wireless Solutions has received Vital Processing
Services’ “Class B” platform certification for both its restaurant and
retail software applications in the USA.. The software applications, which
run seamlessly on Wildcard’s “TransAKT” wireless POS terminals, will allow
the Company to immediately begin marketing its flagship product in the
American marketplace. Wildcard is currently in negotiations with several of
these U.S. merchant acquirers who are interested in marketing and
distributing the company’s “TransAKT” POS terminals.

ISRACARD SELECTS CYOTA

Isracard has selected Cyota to provide “Verified by VISA” and
“MasterCard SecureCode” to its cardholders. Isracard, one of the first
issuers to announce a “MasterCard SecureCode” service worldwide, will
launch the new services to its cardholders this quarter. Isracard
previously launched “SecureClick”, Cyota’s surrogate number solution two
years ago. Isracard is owned by Bank Hapoalim and issues the local
“Isracard” credit card, as well as MasterCard, AmEx and VISA. It has over
1.5 million cardholders.

AmEx Gift Card

American Express has joined the gift card bandwagon. The new American Express Gift Card features a card embossed with the recipient’s name and good at all retailers that accept the AmEx cards. The new card is available in amounts from $25 to $500 and can be purchased through the American Express Web site. The new “Gift Card” is the latest addition to the AmEx prepaid services portfolio which includes the Travelers Cheque, Cheques for Two, Gift Cheques, the Be My Guest dining card, as well as a range of corporate incentive prepaid products, through American Express Incentive Services. Last month, VISA U.S.A. formally announced its gift card. VISA estimates the overall market for gift cards to be nearly $300 billion, which corresponds to approximately $174 billion for consumer gift cards and another $124 billion for commercial applications.(CF Library 9/25/02).

E-Billing Projections

Consumer adoption of Internet-based billing and payment applications continues to increase, as 22% of the U.S. adult population will be using these applications by the end of 2002, up from 16% percent in 2001. The research, conducted by Gartner, also projects that by the end of 2005, the number of consumers using online account management and e-billing applications will have grown to 45% of the U.S. adult population. Gartner says credit-card issuers are the most savvy of marketers and the most advanced in customer service. Applications in which consumers interact directly with billers have earned at least 20 times the adoption of the recent bill-consolidator model that requires consumers to change normal interaction patterns. Gartner analysts said that consumers prefer viewing and paying their e-bills directly at biller Web sites rather than registering for a consolidated model at their bank’s (or other service provider’s) Web site, where they can only receive two or three of their major bills. Credit card issuers and telecommunications companies have been the most aggressive in developing e-billing Web sites and developing customer service functionality around them.

CMS Signs The North West Company

San Francisco-based Credit Management Services has signed The North West Company, which operates 176 food and general merchandise stores in northern Canada and Alaska, as a client to use CMS’ credit card application solution to support its private label credit card business. CMS provides a powerful application solution that helps credit card providers (retailers, banks, financial institutions, private label and co-branded credit providers) become more competitive. CMS’ proven solution offers strategic advantages to corporate credit programs.

Travel Holdouts

The economic uncertainty continues to impact consumer travel. Nearly 80% of respondents to a Hotwire survey said they have yet to book December holiday travel, with 61% planning to put off the task until at least November. Additionally, 23% plan to wait until the last minute, saying they won’t book December travel until after Thanksgiving. At the same time, 57% of those planning to purchase December holiday travel say they want to be careful about how much they spend on holiday travel this year, citing concerns about the economy as the reason they plan to spend less. Hotwire says U.S. flying capacity is down at least 10% from last year. This means airlines are flying with fewer open seats and charging higher fares.

TSYS & 5Star Bank

5Star Bank has signed a 5-year renewal agreement with TSYS for consumer and commercial card account processing for 5Star’s 200,000 card portfolio. 5Star Bank, with $215 million in assets and $100 million of credit card loans under management, is a niche provider of depository and credit card services to its customer base, including members of its parent company, Armed Forces Benefit Association (AFBA).