The Conference Board Leading Economic Index (LEI) for the Euro Area decreased 0.2% in May to 108.8 (2004 = 100), following a 0.2% increase in April and a 0.5% decline in March. The Conference Board Coincident Economic Index (CEI) for the Euro Area, which measures current economic activity, declined 0.1%t in May and now stands at 103.0 (2004 = 100), up 0.3% in April, following a 0.2% decline in March. The eight components of the Euro Area Conference Board Leading Economic Index include Economic Sentiment Index; Index of Residential Building Permits Granted; Index of Capital Goods New Orders; the EURO STOXX Index; Money Supply; Interest Rate Spread; Eurozone Manufacturing Purchasing Managers’ Index; and the Eurozone Service Sector Future Business Activity Expectations Index.
Infosys shares closed down 9.59 per cent on BSE at Rs 2988.80 after the Indian outsourcing firm reported lower-than-expected fourth quarter net profit, and dragged the broader market down. Infosys Technologies Ltd , India’s No. 2 software services exporter, lagged market expectations despite a 13.7 percent rise in quarterly profit, hurt by higher expenses in a seasonally weak quarter. Infosys could move lower because clearly the results are subdued and you are sitting on a large rally.
The Conference Board Leading Economic Index (LEI) for the Euro Area increased 0.5% in January to 107.5 after a 0.7% increase in December and a 0.7% increase in November. The CEI for the Euro Area, which measures current economic activity, remained unchanged in January at 102.6 (2004 = 100) following an increase of 0.1% in November. The eight components of The Conference Board Leading Economic Index® for the Euro Area include Economic Sentiment Index (source: European Commission DG-ECFIN) Index of Residential Building Permits Granted; Index of Capital Goods New Orders; EURO STOXX Index; Money Supply (M2); Interest Rate Spread; Eurozone Manufacturing Purchasing Managers’ Index; and Eurozone Service Sector Future Business Activity Expectations Index.
Payment Data Systems’ credit card processing volumes for were through the roof in 4Q/10, up 31% from the previous quarter. The integrated electronic payments solutions provider also disclosed its December 2010 period had the highest credit card processing volumes were the highest of any other month in 2010, posting credit card dollars processed up 22% over November 2010. Processing dollars directly relates to gross revenue. As volume for processing dollars rises, the gross revenue for the Company’s payment processing rises as well. Payment Data Systems is an integrated payment solutions provider to merchants and billers.
Pre-tax net ROA for the credit card industry for 2009 and 2010 were at the lowest point since 1983, 2009 saw pre-tax ROA at 1.50% (down from a 4.25% average for the last decade), while last year’s 2010 net pre-tax ROA rose slightly to 2.10%.
This is the lowest since R.K. Hammer began tracking card profit metrics, which discloses given card companies only earned 2.1 cents pre-tax after expenses on every dollar of unsecured outstanding card loans on their books in 2010, and only 1.25 cents after-tax. Also, the average credit card account in the R.K. Hammer model earned only $45.46 pre-tax profit per year per consumer account for the bank card businesses issuing those cards; with the average “active” consumer account earning $83.33 per year pre-tax profit, both cut 40% for even smaller after-tax net results.
The onslaught of new rules will cost the card industry over $26 Billion per year, including “Goodwill Impairment,” primarily on intangible assets of subjective value which often have to be written down, to match a lowered balance sheet value with more accurate reduced current market value; loan losses on unsecured card debt still remain stubbornly and historically high; Net Charge Offs, which averaged around 5.00% for the last ten years, jumped to over 10% during the past two years; restructuring charges cost higher associated expenses and more red ink; and the proposed “Interchange Fee Limits.”
However, businesses will begin to hire again (when given incentives to do so), IT investment for the future will resume, financial institution capital will be replenished, shareholder dividends will be restored, banks will resume sensible lending to creditworthy consumers and businesses by providing the services and value they want (new account solicitations have doubled in the past year), loan losses will stabilize and normalize…and the business cycle will once again move ahead.
The Conference Board Leading Economic Index (LEI) for the Euro Area increased 0.7% in November to 114.3 (2004 = 100), following a 0.3% increase in October and no change in September. The Conference Board Coincident Economic Index (CEI) for the Euro Area measuring current economic activity dropped 0.1% to now stand at 102.6 (2004 = 100) according to preliminary estimates. This after having increased 0.2% in October and dropping 0.1% in September. The Conference Board LEI for the Euro Area aggregates eight economic indicators that measure activity in the Euro Area as a whole (rather than indicators of individual member countries), each of which has proven accurate on its own. Aggregating individual indicators into a composite index filters out so-called “noise” to show underlying trends more clearly.
American consumers are changing their overall shopping habits, decreasing discretionary spending over the next six months, with those uncomfortable with their level of debt has increased 5% to 38% since June since 2Q/10. Meanwhile, those “somewhat” or “very uncomfortable” with their savings level is now at 52%, up 3% since June; 49% avoid shopping altogether or shop only for the essentials; 31% enjoy the occasional splurge; only 19% are able to shop for both the things they need and the things they want; and 72% have cut back on everyday expenses. These findings, according to recent nationwide survey issued by Citi and conducted by Hart Research Associates, demonstrate a growing unease in saving and spending habits. With this, 28% believe it is only a fair time to make a major purchase while 38% feel this sentiment is a poor one; 70% cutback on entertainment spending; 66% have cut back on credit card purchases; 36% are eliminating or reducing mobile phone costs and 34% are eliminating or reducing pay, cable, or satellite television service. To 36%, a decrease in the national unemployment rate indicates economic improvement while 25% say they would rather be encouraged by more jobs in their own area.
A growth slowdown starting this summer is becoming increasingly apparent, with 2Q/10 GDP growth probably the highest for the year. There are no signs of a âdouble dipâ recession as The Conference Board US “Leading Economic Index” points to continued, though slower growth for the rest of this year. Weak consumer confidence, slow job growth and flat confidence levels among CEOs all support the slow growth scenario. The Board is expecting GDP growth in a range of 1.5 to 2% for 2H/10 as a result of slow consumer spending, weaker investment growth and a significant cutback in government spending.
Moody’s Investors Service has downgraded the ratings on three classes of asset-backed notes issued by the
CompuCredit Acquired Portfolio Business Trust (“APBT”). Placed under review for downgrade four classes
of notes issued by the APBT, and all five classes of rated notes issued from the CompuCredit Acquired
Portfolio Voltage Master Business Trust (“Voltage MBT”), these notes are all backed by revolving pools of
primarily sub-prime, unsecured, general purpose VISA credit card receivables. Collateral performance has
deteriorated since 1H/09 and the company’s ability to renew one of its key funding sources remains in
question. CompuCredit filed WARN notices with several state labor departments, indicating the company’s
intention to reduce headcount across its servicing and customer service call centers. CompuCredit
reductions in staffing or
disruptions in operations may further compromise the ability to collect outstanding
receivables and a subsequent increase in charge-off rates.
Capital One posted a third quarter $290 million profit for its U.S.
Card business. The issuer delivered the significant profit in the face
of rising delinquency and charge-offs, coupled with declining balances
and volume. The profits was driven by an improving revenue margin. COF’s
revenue margin rose 230 basis points from the second quarter to 16.76%.
Purchase volume of $23.8 billion for 3Q/09 was off 10% from the year ago
quarter, but flat compared to the second quarter. U.S. managed card
outstandings declined to $61.9 billion for the third quarter, compared
to $64.8 billion in the previous quarter and $69.4 billion for 3Q/08.
The managed delinquency rate (30+ days) for U.S. credit cards was 5.38%
for the third quarter, compared to 4.77% for 2Q/09 and 4.20% for the
third quarter of 2008. The net charge-off rate for U.S. credit cards was
9.64% for the third quarter, compared to 9.23% for the second quarter
and 6.13% one-year ago. During the quarter Cap One changed its reporting
structure, dividing its business into three segments: Credit Card,
Commercial Banking and Consumer Banking. For complete details on Capital
One’s third quarter performance, visit CardData (www.carddata.com).
COF U.S. CARD NET INCOME
3Q/08: $344.2 million
4Q/08: $-176.3 million
1Q/09: $0.7 million
2Q/09: $166.9 million
3Q/09: $289.8 million
Source: CardData (www.carddata.com)
The Canadian Foundation for Advancement of Investor Rights (FAIR Canada)
recently submitted its comments to the Canadian Securities
Administrators (CSA) on proposed amendments to the mutual fund POS
initiative. FAIR Canada expressed strong support for the CSA’s goal to
provide investors with clear, meaningful and simplified information when
mutual funds are sold to retail investors, but is concerned about
certain aspects. The concerns include the reduced “cancellation right,”
under which investors lose existing statutory right of withdrawal and is
left with less than his or her original investment if the value of the
mutual fund investment has fallen in the intervening 1-2 days, and the
default non-delivery of the Simplified Prospectus, meaning it will not
be delivered to the great majority of retail investors. Additionally,
FAIR Canada wants the transition period changed from two years to six
months and has recommended the CSA consider how the POS initiative can
provide a platform for future regulatory reform.
BMO Spend Payment Solutions has partnered with Tri-Pen TravelMaster
Technologies in the first of several partnerships that BMO will announce
in the coming weeks for its “Business Travel Alliance.” This latest
partnership addresses the needs of business meeting with customers,
prospects and partners while keeping costs down. In doing so, BMO
supplements standard travel addendum data with its own proprietary card
data to create purchase detail specific to the unique needs of clients.
The combining of BMO’s corporate card and spend management solutions and
TravelMaster’s decision support makes for its dashboard with
consolidated global T E data to control travel expense. This allows
travel managers, purchasing and financial executives to access and
analyze a range of information on T E expenditures. The dashboard
addresses the variance of booked versus actual expenditures; the booking
within corporate policy; potential savings not addressed; transaction
pattern of top vendors; and transaction patterns of individual travelers.