US and UK teenagers spent $483 million on-line last year, with this figure to increase to $10.6 billion by 2005 according to a new research report. Datamonitor says teenage payment systems, such as prepaid cards, are currently provided by only a handful of suppliers. As such, the sector is lucrative, but marketing and advertising to teenage consumers is likely to prove difficult and operators should look to tie-in with larger teenage-friendly brands. Datamonitor says that although teens can make purchases indirectly using a parent’s credit cards, the buying experience is not the same due to the loss of independence for the teenager. The research firm says the dominance of the credit card in the US will allow products connected to parents’ credit cards to flourish. However, Europe will see more independent solutions emerging, with products developed by independent companies such as Smartcreds and Splash Plastic, but also from banks.
NCR has added a ‘Global Incident Management’ to its on-line NCR ‘@ Your Service’. Once logged in, customers can request service for any piece of equipment under maintenance at any geographic location. The service is currently available in North America, the United Kingdom, France, Spain, Denmark and the Netherlands.
Independent market analyst, Datamonitor’s new report, Online Teen Payments finds that teenagers are
spending millions of dollars online across the US and Europe.
Teenage payment systems, such as prepaid plastic cards, are currently
provided by only a handful of suppliers. As such, the sector is lucrative,
but marketing and advertising to teenage consumers is likely to prove
difficult and operators should look to tie-in with larger teenage-friendly
brands. As teenage payment cards become increasingly commonplace, payment
providers should take responsibility to encourage money-management skills
among young consumers.
Datamonitor looked at teenage online spending across the US and 7 EU
countries and found that teenagers spent $483 million online in 2000.
Datamonitor’s forecasts reveal that this figure will increase to $10.6 billion
by 2005 with the development of new payment options, specifically targeted at
teenagers. Teenagers are among the most likely groups to pay on the Internet,
however, their inability to obtain credit cards and low online debit
acceptance has historically made online payment difficult.
Despite being one of the main groups of users on the Internet, many
teenagers have no way of purchasing goods online. With a low number of Web
sites accepting debit cards there is often no way a teen can independently
shop online. The primary means of payment used on the Internet, the credit
card, is not available to them. This implies that a market for an alternative
payment system targeted at teens (i.e. those who cannot apply for a credit
card) exists and that web merchants must integrate new solutions if they want
to target the teen market. Although teens can make purchases indirectly using
a parent’s credit cards, the buying experience is not the same due to the loss
of independence for the teenager.
Prepaid or stored value cards (with the former the money is stored in an
account whereas the latter stores the money on the card, like an ePurse) allow
teens to shop on the Internet securely and without getting into debt. It is
this type of product that is currently growing rapidly, both in use and the
number of competitors in the market.
Prepaid Cards Could Encourage Responsible Spending
“Payment providers must take responsibility for the product that they are
providing. In giving teens a card of any sort they are familiarizing them
with plastic. However, it is does not necessarily follow that they are
encouraging a debt ridden society. Prepaid cards reinforce the idea of using
plastic to pay for what you can afford, by only allowing transactions where
there are sufficient funds loaded onto the card. Payment providers should
encourage responsible spending behavior. Some operators are doing this
through the provision of money management information and tests on their
websites. This helps reassure parents that these products can help their
children learn about how to manage their finances,” comments Julie Cunningham,
Datamonitor financial services analyst.
An Attractive Target Market, Potentially Being Ignored by the Banks
Customer segmentation is increasingly vital as the card payment market in
general moves towards tailored solutions, providing differentiation and a
competitive advantage. Although individually teenagers have limited income,
together their income amounts to significant spending power. Combining this
with the fact that all teen income is disposable makes teens an attractive
segment for companies to target.
If banks and card issuers fail to target teenage business, other companies
providing tailored products will not only gain this business but also retain
it at later stages in the customer’s life.
“There is a need in the market for a teen payment product that allows
secure payments online. Teens want to have their independence and to shop
online. Both traditional players and new entrants have a part to play in this
market. New entrants can attract teens through the ‘cool factor,’ while
traditional players should use their established role in society as a way to
convince parents and to gain their support. If traditional players ignore
teenagers they face losing future, profitable customers and they will face an
uphill struggle against new, ‘cooler’ brands,” comments Ms. Cunningham.
Consolidation is Inevitable
Online teen payments will grow considerably in the next five years. This
is in part due to the growth of the Internet that will be seen across society.
However, growth is likely to be very different in the US compared to Europe.
US teenagers in general have much more money at their disposal than their
European counterparts. The dominance of the credit card in the US will allow
products connected to parents’ credit cards to flourish. However, Europe will
see more independent solutions emerging, with products developed by
independent companies such as Smartcreds and Splash Plastic, but also from
banks. Although the teen payment market seems large, it must be remembered
that teens have limited income and although there are possibilities to extend
this market, this will not stop consolidation occurring. As more companies
launch products aimed at this market consolidation is inevitable.
Tie-ins With Large Brands could Prove Successful
Teenage skepticism about large-scale advertising and marketing campaigns
makes them difficult to target. Marketing cannot be too over the top or
childlike, yet at the same time, the concept must be explicit enough to strike
a cord with teenagers. Teens are likely to switch as new products enter the
market and become ‘cool’ and cutting edge. One way branding can be used is by
creating links such as discounts with the large brands, for example Coca-Cola,
Nike etc. Although brand loyalty is likely to be low, the importance of a
strong, fun, cool image is vital. If something is seen as ‘cool,’ teens are
likely to pass on the word to their friends. This can be the strongest form
of marketing possible. Operators such as Splash Plastic and Visa Buxx have
found that when teens like the product, they are quick to pass on the details
to their peers.
“Teens may be hard to target but it is possible. The need for a payment
product that gives security and allows them to do something they currently
cannot do is almost enough to sell cards in itself. However, as competition
in the market increases, marketing will become more important. An offline
presence will be necessary, as will linking the products to current trends.
Care must be taken not to let the product get outdated as holding the interest
of the teen consumer is vital,” comments Ms. Cunningham.
Teenagers’ Will be Able to Use Plastic Offline
The importance of a presence in the offline environment should not be
underestimated. The majority of a person’s time is spent offline and as such
it is vital to advertise offline. With products such as Visa Buxx offering
both online and offline acceptance, this puts other companies under pressure
to provide the same. Currently, this is only true in the US, but as products
continue to be launched this will extend to other countries. With more
companies entering the market, it will be the one with the most features that
will survive. As such, offline acceptance will become a matter of course.
Online Teen Payments forms part of Datamonitor’s Cards & Payments Briefing
Service; a series of 12 monthly strategic briefings, providing in-depth market
analyses, case profiles, forecasts and action points for success.
Datamonitor plc is a premium business information company specializing in
industry analysis. We help our clients, 5000 of the world’s leading
companies, to address complex strategic issues. Through our proprietary
databases and wealth of expertise, we provide clients with unbiased expert
analysis and in-depth forecasts for six industry sectors: Automotive, Consumer
Markets, Energy, Financial Services, Healthcare, Technology. Datamonitor
maintains its headquarters in London and has regional offices in New York,
Frankfurt, and Hong Kong.
Hilton HHonors, the only guest reward program in the world that allows members to Double Dip to earn Points & Miles for the same stay, is offering double miles this fall.
From Sept. 1 through Nov. 15, 2001, members can earn twice as many airline miles for each Double Dip stay after one initial Double Dip stay during the promotion availability period. In addition, travelers who charge their Double Dip stay to their Visa(R) card will earn 1,000 HHonors bonus points for each of these additional stays at all HHonors hotels worldwide.
Participating hotels include Hilton, Conrad, Doubletree, Embassy Suites Hotels, Hampton Inn, Hampton Inn & Suites, Hilton Garden Inn and Homewood Suites by Hilton. All HHonors airline partners are participating in the promotion. “In our opinion, there’s no better way to help our customers reach their travel goals faster than by offering them Points & Miles for each stay,” said Jeffrey Diskin, president and chief operating officer of Hilton HHonors Worldwide. “But by doubling the amount of miles and increasing the number of bonus points our members can earn, HHonors is making it even easier for them to earn that extra vacation.”
Visa is the world’s leading payment brand and the largest consumer payment system worldwide. Visa-branded cards generate almost US$2 trillion in annual volume and are accepted at more than 22 million locations around the world. The Visa organization plays a pivotal role in advancing new payment products and technologies to benefit its 21,000 member financial institutions and their cardholders. Visa is a leader in Internet-based payments and is pioneering the creation of u-commerce, or universal commerce — the ability to conduct commerce any time, anywhere, over any type of device.
About the HHonors Program
Hilton HHonors is a guest reward program that gives frequent travelers a faster way to earn the rewards they want most. Enrolled members can earn Points & Miles for the same stay, at nearly any rate, a benefit HHonors calls Double Dipping(R). Points & Miles are available at more than 2,100 participating Hilton, Conrad, Doubletree, Embassy Suites Hotels, Hampton Inn, Hampton Inn & Suites, Hilton Garden Inn and Homewood Suites by Hilton hotels around the world. In addition, HHonors is the only guest reward program that allows its members to exchange airline miles for hotel points and vice versa with selected airlines.
Because of the unmatched flexibility, generosity and value offered by HHonors program features, as well as the many attractive promotions that HHonors offers each year, the program has been recognized with numerous travel industry awards.
Membership in Hilton HHonors is free. Travelers may enroll online by visiting [www.hiltonhhonors.com]. Or, to enroll instantly in the program and make reservations, consumers in the United States and Canada may also call 800/HHONORS. Outside the United States and Canada, travelers may call the Hilton Reservations Worldwide office in their area.
Travelers also may pick up an enrollment form with a membership card at any participating Hilton, Conrad, Doubletree, Embassy Suites Hotels, Hampton Inn, Hampton Inn & Suites, Hilton Garden Inn or Homewood Suites by Hilton hotel around the world.
Hilton Hotels Corp. and Hilton International, a subsidiary of Hilton Group plc, have a worldwide alliance to market Hilton, the world’s best-known hotel brand. Collectively offering more than 2,300 hotels in more than 60 countries worldwide, both companies are recognized as leaders in the hospitality industry. Hilton International currently operates more than 380 hotels in more than 60 countries worldwide.
Trintech Group Plc, a global provider of secure payment infrastructure solutions for real world, Internet and wireless environments, announced St.George Bank Limited as the first company in Australia to employ their innovative payment dispute resolution software, PayWare Resolve. This solution was implemented through a partnership with eFunds International Limited (NASDAQ: EFDS) who are a leading provider of electronic payment solutions and professional services to financial institutions, financial services companies and retailers. eFunds is the sole regional reseller in Asia Pacific for Trintech’s PayWare Resolve line of products, which integrates with the eFunds DataNavigatorÂ solution.
The St.George Bank implementation will significantly streamline the bank’s management of disputed payment transactions, known as chargebacks, allowing the bank to reduce costs, increase productivity and improve customer service levels. The PayWare Resolve suite of products includes solutions for automated payment dispute resolution, as well as fraud and risk management for issuers, financial transaction processors, acquirers and merchants.
St.George has licensed PayWare Resolve IS – a chargeback management system for issuers and processors – and PayWare Resolve AS to handle chargeback management for acquirers, processors and merchants. At St.George, these solutions will combine with eFunds DataNavigatorÂ, allowing staff to more efficiently handle disputes and exceptions.
St.George CEO and Managing Director Ed O’Neal said prior to implementing PayWare Resolve that the bank relied on a manual, paper based system to manage chargeback processing.
“As part of our endeavor to reduce the time and costs associated with chargeback management, St.George has been investigating several software options that would fully automate this process for us. We believe Trintech’s PayWare solutions interfaced with our existing DataNavigatorÂ solution from eFunds will enable us to achieve significant cost efficiencies within the issuing and acquiring side of the business,” Mr. O’Neal said.
eFunds’ Chairman and CEO Gus Blanchard said the combination of DataNavigatorÂ and PayWare Resolve delivers a powerful chargeback management solution. “The PayWare Resolve solutions have the payment organizations regulations built into the system enabling St.George to benefit from reduced staff training time, consistent handling of disputes as well as increased productivity,” he said.
“We are pleased that our existing skills, solutions and business relationships are allowing St.George Bank to achieve its productivity and cost saving goals,” Mr. Blanchard said.
Trintech CEO John McGuire explained that “PayWare Resolve cuts the time and cost of processing exceptions and disputes, while providing sophisticated management information that helps reduce those that do occur,” he said.
“We are delighted to be working in partnership with eFunds in Asia-Pacific and to have St.George as our first Australian site for PayWare Resolve. We believe that they will realize the same benefits of increased productivity and improved customer service that existing customers of our software are already enjoying,” Mr. McGuire continued.
PayWare Resolve Product Overview
Trintech’s Chargeback Systems (The PayWare Resolve product suite) for acquirers, issuers, processors and merchants automates the exception management process from end-to-end, increasing processing efficiency and creating more opportunities for greater customer care.
PayWare Resolve combines a powerful decision-support environment with compliant dispute regulations to enable optimum management of the entire chargeback process using an easily understood graphical user interface, for swift and informed decision-making.
The essential difference between PayWare Resolve and other exception management systems is its built-in knowledge of national and international chargeback regulations. The chargeback regulations for VISA and MasterCard/Europay have been encoded into the application so that the system can recommend the appropriate action and chargeback reason codes for each case, replacing the need to navigate a series of intricate paper trails and complex and changing regulations. Combined with the solutions ease of use, this dramatically reduces the average training time for new staff to be fully operational.
Founded in 1987, Trintech is a leading provider of secure electronic payment infrastructure solutions for card-based transactions for physical world commerce, eCommerce and mobile commerce. The company offers a complete range of payment software products for credit, debit, commercial and procurement card applications, as well as being a world leader in the deployment of payment solutions for Internet commerce that are fully SSL and SETÂ compliant. Trintech’s range of scalable open systems architecture solutions for UNIXÂ® and Windows NTÂ platforms covers consumer, merchant and financial institution requirements for physical payments and the emerging world of electronic commerce.
Trintech can be contacted in the U.S. at 2755 Campus Drive, San Mateo, CA 94403 (Tel: 650-227-7000) and in Ireland at Trintech Building, South County Business Park, Leopardstown, Dublin 18 (Tel: 353-1-207-4000).
Trintech can be reached on the Web at http://www.trintech.com.
St.George Bank Limited, Australia’s fifth largest bank, has a unique place in the Australian financial services market. At the Bank’s core is a close relationship with its customers and this remains the cornerstone of future strategies, an important tradition that distinguishes St.George from other large Australian banks.
Founded in 1937 as a housing-based financial institution, St.George built a reputation as Australia’s foremost building society, before achieving full banking status in July 1992.
St.George expanded its services to commercial customers in 1994 when it acquired the Commercial Banking Division of Barclays. This move made St.George a full service bank.
About eFunds International
Based in the UK, eFunds International Limited is the European operation of eFunds Corporation.
eFunds delivers innovative, reliable and cost-effective technology solutions to meet its customers’ payment and risk management, e-commerce and business process improvement needs. eFunds provides its services to financial institutions, financial services companies, electronic funds networks, retailers, government agencies, e-commerce providers, and other companies around the world. The company’s software solutions include: eFunds Internet Financial Management (IFM) product range, providing Internet banking solutions tailored for the retail, small business and corporate segments of a bank’s customer base; CONNEX*, which offers ATM and POS electronic funds transfer driving, switching, authorisation and settlement services to banks and financial networks; DataNavigator*, a back-office solution for the post-processing of retail electronic transactions; and Architect, a strategic middleware hub for enterprise application integration.
For more information, visit http://www.efunds.com.
Logica PLC has been selected to assist the government to formulate a policy for the future use of smart cards, including the use of digital signatures and smart cards in the public and private sectors and by individual citizens. The government will publish consultation papers by the end of this year which will detail digital signatures for citizens and businesses, as well as the role smart cards will play. The British government will also establish policy working groups to address privacy concerns.
Trintech Group Plc, a global provider of
secure payment infrastructure solutions for real world, Internet and wireless
environments, announced that Barclaycard, a subsidiary of Barclays Plc, has selected Trintech’s PayWare eIssuer as one of the key
initiatives it will look to deploy in its increasingly forceful entry into the
eCommerce payments arena. The deal will enable Barclaycard to offer eWallet
functionality and will provide a more convenient shopping experience for
consumers at a wide range of leading online websites.
The wallet will also be available through Shopsmart, the UK’s leading
comparison shopping website for use at all of its retail partners.
“Partnering with Trintech and utilizing their flexible yet powerful
payment technology has enabled us to extend our reach into this arena,
allowing us the opportunity to expand into the mobile and set-top markets in
the future,” said Sonja Roberts, Director of eCommerce at Barclaycard.
“Barclaycard considers the Internet an essential medium for the delivery of
goods and services to consumers and merchants.”
Commenting on the deal with Europe’s leading issuer of credit cards, John
McGuire, CEO of Trintech was delighted to announce, “Trintech will work
closely with Barclaycard to provide the PayWare eIssuer infrastructure that
will speed up transaction times and lead to a more satisfactory and secure
payment experience for consumers and merchants.”
Barclaycard is Europe’s leading issuer of credit cards with 7.9m customers
in the UK alone. Operations abroad include Germany, France, Spain and Greece.
Barclaycard was the first and is the UK’s leading card services provider
on the Internet. 500,000 customers regularly use Barclaycard’s online account
Shopsmart Ltd is the UK’s leading Internet comparison shopping site.
Formed in 1999, Shopsmart was acquired in April 2001 by Indigosquare Ltd (a
joint venture between Barclays Bank and Nomura International PLC). The deal
combined two of the foremost players in the market to create the UK’s number
one comparison shopping site.
Founded in 1987, Trintech is a leading provider of secure electronic
payment infrastructure solutions for card-based transactions for physical
world commerce, eCommerce and mobile commerce. The company offers a complete
range of payment software products for credit, debit, commercial and
procurement card applications, as well as being a world leader in the
deployment of payment solutions for Internet commerce that are fully SSL and
SET(TM) compliant. Trintech’s range of scalable open systems architecture
solutions for UNIX(R) and Windows NT(TM) platforms covers consumer, merchant
and financial institution requirements for physical payments and the emerging
world of electronic commerce. Trintech can be contacted in the U.S. at 2755
Campus Drive, San Mateo, CA 94403 (Tel: 650-227-7000) and in Ireland at
Trintech Building, South County Business Park, Leopardstown, Dublin 18
(Tel: 353-1-207-4000). Trintech can be reached on the Web at
About PayWare eIssuer
Trintech’s PayWare eIssuer is an online virtual credit card purchase and
payment solution, which simplifies and secures online purchasing over the
Internet and wireless networks. It is a powerful marketing and risk reduction
tool that develops and strengthens customer relationships.
This press release contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, relating to, among
other things, future applications, functionality and performance of PayWare
eIssuer. Any “forward-looking statements” in this press release are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those stated. Factors that could cause or contribute to such
differences include the availability of financial resources to continue
investment in research and development, and Trintech’s ability to effectively
respond to future changes in the ePayment software market. Actual performance
may also be affected by other factors more fully discussed in Trintech’s Form
6-K for the quarter ended April 30, 2001 filed with the U.S. Securities and
eFunds has signed a new agreement to provide Experian with the debit information in eFunds’ ‘DebitBureau’ database for use in certain Experian products and services. Experian will use the ‘DebitBureau’ database in offerings that include prescreen segmentation and suppression, emerging consumer identification and assessment, portfolio management, scoring and online reports. By allowing Experian to use eFunds’ ‘DebitBureau’ database, many consumers who were previously denied credit because of their limited credit information may now receive credit card offers. eFunds’ ‘DebitBureau’ database contains more than 3 billion records related to checking and savings account opening and closing information, checking account collections data, overdraft histories and check order histories. The database is growing at about 31 million records a month, receiving information from more than 77,000 retail locations, 90,000 financial institution locations and other sources.
Baltimore Technologies, plc announced a significant restructuring and cost reduction
programme that will enable the Company to refocus on its core areas of
expertise in providing trust and security for e-business. This strategy will
enable it to extend its leadership position in the market for authentication
and authorisation applications and solutions. The restructuring plan will
chart a fully funded path to positive EBITDA in Q2, 2002. The Company also
announced today its second quarter and half year results for the period ended
30 June 2001.
— The targeted cost savings and proceeds of 72.0 million pounds sterling
(US$101.3million) from the restructuring and divestment of non-core
activities will ensure sufficient cash resources are available to fully
fund the Company’s operations to become EBITDA positive in Q2, 2002.
— Baltimore Technologies will focus on maximising return from its
authorisation and Public Key based authentication technology, in a
market estimated by IDC to be valued at US$4.0 billion by 2004. These
offerings will be combined into one business unit targeting Baltimore’s
core traditional sectors in addition to exploiting the emerging
opportunities in the wider Corporate market so as to restore its market
— Direct salesforce reorganised to offer both authentication and
authorisation products individually or as part of an integrated
solution. A fundamental review of the business and sales engagement
models has been conducted in order to realign direct and indirect sales
channels to jointly market both Baltimore’s authentication and
authorisation products and solutions.
— The review has concluded that there are 2 clearly different businesses
with limited synergies between them. The market leading Content
security business will immediately be run as a separate business unit.
The Board strongly believes in the potential of this business and has
concluded that a divestment strategy will maximise its market
opportunity and the overall return for all stakeholders.
— The Company has initiated a review of the potential divestment of all
other non-core activities with the objective of maximising shareholder
and customer value and to fund the profitable growth of the core
— As part of the restructuring, a reduction of a further 220 positions
will be made.
— The Company is targeting a staffing level of approximately
470 employees, which will be achieved by Q2 2002 primarily through
— Voluntary delisting from NASDAQ and move to the OTC Bulletin Board with
effect from 30 September 2001.
Peter Morgan, Chairman of Baltimore Technologies commented,
“Baltimore earned its reputation as a dynamic company producing innovative
products and solutions. This restructuring ensures that the company is now
fully focussed on its core competencies in providing security and trust for
e-business and will ensure that all activities are closely targeted at
building a strong viable company for the future and delivering enhanced
Paul Sanders, Chief Financial Officer and acting Chief Executive Officer
“The radical restructuring announced today demonstrates our commitment to
growing and investing in the business by concentrating on what we know and do
best. The excellent technology and people within this company have enabled us
to build an acknowledged leadership position in the IT security industry and
this restructuring provides us with a clear, fully funded path to
Q2 and Half Year 2001 Results:
— Total revenues for Q2 were 16.5 million pounds (US$23.2 million)
compared to 22.9 pounds million (US$32.2 million) in Q1 2001 and
16.3 million pounds (US$22.9 million) in Q2 2000.
— Gross Margin was 47% (Q1 2001: 60% and Q2 2000: 64%)
— LBITDA (Loss before interest tax depreciation amortisation and
exceptional items) of 23.7 million pounds (US$33.3 million) has
increased from 17.9 million pounds (US$25.2 million) in Q1 2001 and
from 4.4 million pounds (US$6.2 million) in Q2 2000.
— Ending cash balance of 53.9 million pounds (US$75.8 million) compared
to 83.6 million pounds (US$117.6 million) at the end of Q1 2001.
Half Year 2001
— Total revenues for H1 were 39.4 million pounds (US$55.4 million)
compared to 25.7 million pounds (US$36.1 million) in H1 2000.
— Gross Margin was 54% (H1 2000: 65%)
— LBITDA (Loss before interest tax depreciation amortisation and
exceptional items) of 41.6 million pounds (US$58.5 million) compared to
9.7 million pounds (US$13.6 million) in H1 2000.
— Non-cash goodwill write-off of totalling 503.8 million pounds
(US$708.5 million), following write down of acquisitions and
Paul Sanders, Chief Financial Officer and acting Chief Executive Officer
“There is little doubt that this has been a difficult period for the group
whilst, the strength of our technology offering enabled us to achieve revenues
of 16.5 million pounds (US$23.2million) for the second quarter of this year
and 39.4 million pounds (US$55.4 million) in the first half of 2001. Clearly
these results are not acceptable and do not reflect the Company’s true
potential. The measures we have announced today will firmly address this
* Six months to 30 June 2001 includes restated results for first quarter
Baltimore Technologies has grown rapidly both organically and by
acquisition in the past 18 months. However, the downturn in global IT
spending combined with recent operating results has made it necessary for the
Company to fundamentally examine its approach to the market and to ensure that
it has the right cost base to deliver the anticipated revenues.
To achieve the targeted annualised savings of 72 million pounds
(US$101.3 million) Baltimore is implementing a significant restructuring plan
to concentrate on its core competencies of authorisation and Public Key based
authentication products and solutions. In parallel, the Company will pursue a
policy of divestment of non-core activities. This restructuring plan will
chart a fully funded path to positive EBITDA in Q2, 2002.
— Focus on Core Competencies of Security & Trust
The Company sees continuing opportunities for authorisation and
authentication technology deals amongst its traditional market sectors of
finance, healthcare, government and telecommunication companies where, despite
its deployment concerns, public key based security is the defacto standard.
In addition, the implementation of digital signature legislation around
the world and an increase in the adoption of devices for e-business such as
mobile phones and smartcards will ensure growth for e-security authentication
and authorisation solutions. Datamonitor forecast that the wireless PKI
market will represent more than 40 % of the total PKI market by 2006 and the
Company believes it is some six months ahead of its competitors in this area.
The success of the Baltimore Telepathy wireless solution has already been
evidenced by the recent deal with Radiolinja.
Baltimore’s authorisation product, SelectAccess continues to establish
itself in the rapidly growing authorisation market (CAGR 70%).
Why Authentication & Authorisation?
As businesses continue to open more of their internal IT systems to the
Internet, they face a series of security challenges around authentication and
Authentication is being able to verify the identity of someone trying to
access information via an electronic service. Authorisation ensures that the
right people get access to the right information and services.
Given the increase in the value and volume of trade on the web there is a
need to maintain digital evidence of binding transactions, which is necessary
for both normal business-auditing purposes and for dispute resolution. A
common approach being used today and that will continue to be used in the web
services era, is to digitally sign the electronic transaction, verify the
signature and store a copy of the signed data.
Customers will increasingly use the Internet as a distributed operating
system to supporting application services (commonly referred to as web
services) from multiple suppliers. New harmonised security standards
essential for web services are currently being defined, leveraging existing
Public Key authentication and authorisation management systems, and these will
be deployed in the coming years.
Baltimore’s UniCERT PKI authentication and SelectAccess authorisation
systems together provide the key security elements of any information service
delivery platform and future web services. These synergies led to the
decision to closely align the offerings in this space into a single business
Market Strategy for Authentication & Authorisation
Baltimore plans to achieve market penetration for its public key based
technology and authorisation system through a realigned sales engagement model
comprising of direct, and indirect channels. Sales and marketing have been
streamlined worldwide in line with this model.
Baltimore’s direct salesforce will now be structured to offer both
Baltimore’s authentication and authorisation products and solutions either
individually or as part of an integrated solution. Baltimore will continue to
invest in developing future solutions in its European, US and Australian
development centres. A strategic business development group has been created
to focus on key opportunities and initiatives in areas such as wireless and
The Baltimore TrustedWorld Partner programme will be relaunched to better
leverage channels to market and by incorporating complementary vendor
products, Baltimore can provide a wider range of applications, solutions and
service offerings in a more cost-effective model.
In conjunction with its partners, Baltimore is committed to the ongoing
development of its Managed Services Solutions offering as a key element of its
— Manage Content Security as a separate business unit
The market leading Content security business will be run as a separate
business unit with a view to divestment. The Board of Baltimore Technologies
believes in the potential of this business and that this approach will
maximise its market opportunity and the overall return for all stakeholders.
The Content security unit will have its own sales and marketing strategy
targeted at sustaining its leading position in the market. These changes will
enable the business unit to concentrate its efforts on the unique requirements
of the MIMEsweeper channel partners, and maximise revenue opportunities in a
market which is expected to grow according to IDC by 40% per annum until it
reaches a size of US$1.2 billion in 2004.
Content security is increasingly being recognised as necessary to protect
against virus attacks and the distribution of inappropriate content. The
MIMEsweeper product suite is the market leader with strong brand recognition.
The Content business is adopting a two-tier channel strategy based upon Value
Added Distributors (VADs) and Authorised/Premier resellers for its MIMEsweeper
range. OEM opportunities will also be explored with Anti Virus and archiving
vendors. Service Providers will continue to host the e-Sweeper service for
small to medium sized organisations.
— Cost reductions through restructuring
Headcount has been reduced from a peak of 1,400 at March 2001 to
approximately 1,100 employees post the redundancies announced in May. With
immediate effect, there will be a reduction of a further 220 positions
worldwide. The Company is targeting a staffing level of approximately
470 employees, which will be achieved by Q2 2002 primarily through divestment
of non-core businesses.
Baltimore’s extensive office network has already been reduced from 51 to
38 offices with plans to eliminate under utilised and excess office capacity
resulting from its divestments.
— Voluntary NASDAQ Delisting
In light of the high cost of maintaining a separate listing in the USA and
the fall in the ADR price, the company has decided that it is no longer
appropriate to maintain its listing on the NASDAQ national market, and
accordingly will be applying to voluntarily delist its shares from that market
and move to the OTC Bulletin Board with effect from 30 September 2001. Once
completed, the estimated annualised savings from not having a separate US
listing will be at least 2 million pounds (US$2.8 million).
During the period, demand continued for Baltimore’s e-security solutions
in the finance, government and mobile commerce sectors.
In the finance sector, Baltimore was chosen to provide a leading
Australian bank with a PKI-based certificate solution. This bank has also
purchased Baltimore SelectAccess to provide access authorisation to new online
banking services, demonstrating sales synergies between Baltimore’s
authentication and authorisation products.
In the government sector, the Company was also chosen to supply the secure
communications and e-business solutions to the 90,000 Australian Defence
personnel and through Baltimore’s TrustedWorld partner Getronics, Baltimore
UniCERT will provide the underlying security infrastructure for all internal
and external communication requirements for the 25,000 users within the
In the mobile commerce space, the Company won a notable contract for
wireless e-security with Radiolinja, one of Finland’s largest network
operators and a world leader in new mobile services, licensing Baltimore
Telepathy(TM) wireless e-security to build and deploy a complete wireless
trust infrastructure for secure mobile commerce. A further example has been
the strengthening of the relationship with Motorola through partnering to
provide a service to issue mobile operators and service providers with
“short-lived” digital certificates for the security of wireless applications.
The SelectAccess v3 authorisation system was released with new enhanced
features to enable more business processes and transactions to be securely and
cost-effectively conducted online, enabling organisations such as BBS, the
clearinghouse and payment service provider for the Norwegian banking industry,
who chose SelectAccess in Q1 to easily provide secure, role-based user access
to online information and services. Baltimore SelectAccess has recently been
endorsed by Mindcraft, an independent testing lab, when it received the
highest performance marks in tests designed to mirror a real world corporate
Repeat business occurred from Commercial Certificate Authorities worldwide
such as Belgacom E-Trust and Cable & Wireless for Baltimore’s Public Key based
On July 10, Fran Rooney resigned as Chief Executive Officer and Deputy
Chairman of Baltimore Technologies. Paul Sanders was appointed Acting Chief
Executive Officer while retaining his responsibilities as Chief Financial
Officer. The Company is currently undertaking a search for a new Chief
Executive Officer. Changes were also made to the Board with the appointment
of David Guyatt and Bijan Khezri as non-Executive Directors on 12th July.
The Board firmly believes that there is a long-term profitable opportunity
for authorisation and public key based authentication in the Company’s
traditional core sectors of finance, government, telecommunications and
healthcare. The restructuring, together with the divestment of non-core
activity will radically realign the cost base while still maintaining
leadership in innovative authentication and authorisation technology.
Financial Results for H1 2001 and Q2 2001:
— Quarter 2, 2001 Summary (unaudited)
Total revenues for Q2 2001 were 16.5 million pounds (US$23.2 million) an
increase of 2% compared to the same quarter last year and a decrease of
28% over Q1 2001.
Licence revenue of 6.6 million pounds (US$9.3 million) accounted for
40% of total revenue in Q2 compared to 50% in the same period last year and
53% in Q1 2001. The license revenue for the quarter decreased by 18% compared
to Q2 2000 and by 46% compared to Q1 2001. However, services revenues for Q2
2001 of 8.9 million pounds increased by 34% over Q2 2000 and by 10% over Q1
The geographic mix of revenue continues to reflect Baltimore’s strong
global footprint with EMEA, APAC and the US accounting for 47%, 28% and
25% respectively of total revenue in Q2 2001 compared to 53%, 25%, 22% in Q1
2001, and 40%, 34%, 26% in the same period last year.
Gross Profit Margin of 47% is down from 64% in the same quarter last year
and 60% in the first quarter principally due to an adverse change in license
revenue mix and under utilisation of professional services.
LBITDA (before exceptional items) of 23.7 million pounds (US$33.3 million)
increased from 4.4 million pounds (US$6.2 million) in Q2 2000 and from
17.9 million pounds (US$25.2 million) in Q1 2001. Operating expenses before
exceptional items, for Q2 2001 of 91.0 million pounds (US$127.9 million)
(including 57.6 million pounds (US$ 81.0 million) charge for amortisation)
increased by 240% from 26.7 million pounds (US$37.6 million) (including a
10.9 million pounds (US$15.3 million) charge for amortisation) in Q2 2000 and
by less than 1% from 90.4 million pounds (US$127.1 million) ( including a
57.3 million pounds (US$ 80.6 million) charge for amortisation) in Q1 2001.
Exceptional charges in the quarter totalled 393.8 million pounds
(US$553.8 million) and comprises accelerated amortisation of goodwill
389.0 million pounds (US$547.0 million), write off of Fixed Assets of
2.1 million pounds (US$3.0 million) and redundancy costs of 2.7 million pounds
Loss per share before Exceptional Items was 0.16 pounds (US$0.23)
At 30 June 2001, net cash totalled 53.9 million pounds (US$75.8 million),
compared to 83.6 million pounds (US$117.6 million) at the end of Q1 2001.
— Half Year 2001 Summary (unaudited)
Total revenues for H1 2001 of 39.4 million pounds (US$55.4 million)
increased by 53% compared to the same period last year. Licence revenues for
the period were 18.8 million pounds (US$26.4 million) an increase of
42% compared to Q2 2000. Licence revenue accounted for 48% of total revenue
in H1 2001 compared to 51% in H1 2000. Services revenue for H1 2001 of
17.0 million pounds (US$23.9 million) increased by 76% over H1 last year.
The geographic mix of revenue continues to reflect Baltimore’s strong
global footprint with EMEA, APAC and the US accounting for 51%, 26% and
23% respectively of total revenue in the first half of 2001 compared to
45%, 32% and 23% in the same period last year.
Gross Profit Margin of 54% is down from 65% in the first half of 2000, and
reflects the reduction in licence revenue as a proportion of total revenue
compared to the same period last year.
LBITDA (before exceptional items) of 41.6 million pounds (US$58.5 million)
increased from 9.7 million pounds (US$13.6 million) in H1 2000. Operating
expenses before exceptional items for H1 2001 of 181.4 million pounds
(US$255.1 million) (including 114.9 million pounds (US$161.6 million) charge
for amortisation), increased by 329% from 42.3 million pounds
(US$59.6 million) including 14.4 million pounds (US$20.3 million) charge for
amortisation) in H1 2000 reflecting the impact of the acquisitions made in
2000. Exceptional charges in the period totalled 393.8 million pounds
(US$553.8 million) and comprises amortisation of goodwill 389.0 million pounds
(US$547.0 million), write off of Fixed Assets of 2.1 million pounds
(US$3.0 million) and redundancy costs of 2.7 million pounds (US$3.8 million).
At 30 June 2001, net cash totalled 53.9 million pounds (US$75.8 million),
compared to 107.8 million pounds (US$151.6 million) at the end of 2000.
The necessity for making a Goodwill impairment charge has arisen
principally to ensure compliance with FRS 11 to reflect the likely fall in the
value of acquisitions made last year as a result of the global economic
downturn, and lower valuations for technology companies.
At the end of the six month period ended 30 June 2001 the Company had a
cash balance of 53.9 million pounds (US$75.8 million), and had suffered a net
cash out flow of 43.0 million pounds (US$60.5 million) over the same period.
The targeted cost savings from the restructuring and the proceeds from the
divestment of non- core activities will ensure sufficient cash resources are
available to fully fund the anticipated net cash outflow until the Company has
positive EBITDA in Q2, 2002 and is operating cash flow positive in Q4 2002.
As announced on July 30, as part of the extensive business review and
restructuring, Baltimore Technologies discovered specific instances where
software revenues were overstated in the India, Middle East and Africa region
(“IMEA”) due to incorrect contract classifications, which was the direct
result of the actions of a limited number of employees. The restatement
principally relates to Q4 2000 and the impact is a reduction in the revenues
for the 12 month period ended 31st December 2000 of 5.5% from 74.2 million
pounds (US$104.4 million) to 70.1 million pounds (US$98.6 million), and in the
three month period to 31st March 2001 of 3.4% from 23.7 million pounds
(US$33.3 million) to 22.9 million pounds (US$32.2 million). These adjustments
had no effect on the results for the three month period ended 30th June 2001
or on the current cash position of the Company.
About Baltimore Technologies — A Global Leader in Security & Trust for
Baltimore Technologies’ products, services and solutions solve the
fundamental security and trust needs of e-business, ensuring that companies
can verify the identity of who they are doing business with and which
resources and information users can access on open networks. Many of the
world’s leading organisations have chosen Baltimore’s e-security technology to
conduct business more efficiently and cost effectively over the Internet and
wireless networks. The company also offers support worldwide for its
authorisation management and Public Key based authentication systems.
Baltimore’s products and services are sold directly and through its
worldwide partner network, Baltimore TrustedWorld. Baltimore Technologies is
a public company, principally trading on London (BLM). For more information
on Baltimore Technologies please visit .
CIBC announced third quarter Operating Earnings
(which exclude the sale of subsidiaries, an adjustment for tax rate changes
and the net impact of Amicus) of $525 million or $1.29 per share, diluted.
Operating Return on Equity was 20.0%. Reported Earnings for the third quarter
were $460 million or $1.12 per share, diluted, (which include the net impact
of building Amicus, $(0.17); a gain on the sale of subsidiaries, $0.05; and an
adjustment for tax rate changes, $(0.05)). Adjusted Earnings (which exclude
only the sale of subsidiaries and an adjustment for tax rate changes) were
$459 million or $1.12 per share, diluted.
Operating Earnings for the nine months ended July 31, 2001, were $1,631
million, compared to $1,787 million for the same period last year. Operating
Earnings per share, diluted, were $3.99, compared to $4.21 for the same period
in 2000. Reported Earnings for the first nine months of 2001 were $1,444
million or $3.51 per share, diluted, compared to $1,728 million or $4.06 per
share, diluted, for the same period of 2000. Adjusted Earnings for the nine
month period were $1,445 million or $3.51 per share, diluted compared to
$1,698 million or $3.99 per share, diluted for the same period last year.
Year-to-date, CIBC’s Operating Return on Equity was 21.2%. Since November
1, 1999, CIBC’s total return to shareholders is up 69.5%, the best total
return among the major Canadian banks.
“Our performance in a less than favourable business environment is a
clear reflection of our ongoing effort to build a broad-based franchise that
is capable of weathering downturns in the market,” said John S. Hunkin,
Chairman and Chief Executive Officer. “We remain confident that — through the
fundamental strength and diversity of our business portfolio — we are well-
positioned for growth as market conditions improve.”
To strengthen CIBC’s position, Hunkin said the company is continuing to
focus on four key areas, including:
As in the first half of the year, credit conditions continued to be
challenging in the U.S. during the quarter, with trades and services,
manufacturing and telecommunications being the sectors most affected. “We are
managing our business on the premise that conditions are unlikely to improve
during the fourth quarter,” said Hunkin. CIBC continues to manage its market
risk at reduced levels consistent with its goal of low earnings volatility.
Market risk within CIBC’s trading book, measured by risk measurement units,
fell during the quarter to $12.6 million as of July 31, 2001, compared to
$14.8 million at the end of the second quarter and $24.7 million as of October
The growth of Amicus, CIBC’s co-branded retail electronic banking
business, continues to exceed expectations in the area of customer
acquisition. During the quarter, Amicus acquired 121,000 new customers,
bringing the total number of registered customers to 779,000, up 18% from the
previous quarter and 104% from the same quarter in 2000. A highlight during
the quarter was the strategic alliance CIBC entered into with Ahold USA, Inc.,
a leading food retail and food service company, to provide electronic banking
services to the northeastern U.S. market through ABMs, telephone call centres,
the Internet and in-store pavilions. CIBC’s alliance with Ahold is expected to
launch next year and builds upon existing Amicus partnerships with Loblaw
Companies Limited in Canada and Safeway Inc. and Winn-Dixie Stores, Inc. in
Ongoing Business Development
In addition to Amicus, CIBC is continuing to focus on growth across all
of its business units. Developments in the quarter include:
— Electronic Commerce
– PC banking customers (non-Amicus business) grew by 13% to 1.16
million during the quarter. Year-over-year, PC banking customers
are up 66%.
– Telephone banking customers grew to 2.92 million, up 7% from the
second quarter and 26% from the third quarter of 2000.
— Retail and Small Business Banking
– Supporting its goal to provide its retail and small business
customers with Smart, Simple Solutions, CIBC continued its
technology upgrade in the quarter with the installation of 1,090
counter workstations in its branch network. Year-to-date, 1,590
upgraded workstations have been installed in 330 branches.
– To make it easier for its customers to do business, CIBC has
extended operating hours at 86 branches across Canada year-to-date.
– CIBC also continued to expand its bizSmart initiative, with the
opening of nine additional kiosks during the quarter, increasing the
total number operating across Canada to 37. CIBC also expanded
bizSmart’s product offering to include a Personal GIC and a Personal
Line of Credit which offers a credit limit up to $50,000 at an
interest rate of prime plus 1.75%.
— Wealth Management
– CIBC Investor Services Inc. introduced a new website,
www.investorsedge.cibc.com , to enhance and simplify online investing
for customers. The new website has improved navigation and expanded
features including access to CIBC World Markets Canadian equity
– As at the end of June, CIBC Mutual Funds ranked second among the big
six Canadian banks in year-to-date net sales and moved up to third
among all Canadian mutual fund companies. CIBC continued to rank
first in index fund net sales for fiscal 2001, as at June 30, 2001.
— CIBC World Markets
– CIBC World Markets participated in a number of significant
transactions during the quarter, including acting as the sole
underwriter and lead arranger of a US$2.0 billion credit facility to
finance George Weston Limited’s acquisition of Bestfoods Baking
Company. CIBC World Markets was also joint arranger in the financing
of Apax Partners & Co., and Hicks, Muse, Tate & Furst Inc.’s
acquisition of Yell Directories, which include the U.K. Yellow
Pages, from British Telecommunications plc for pnds stlg 2.14
– CIBC World Markets launched its research broadcast via its new
Internet webcast facility. CIBC eTV is a proprietary, web-based
online television station that provides CIBC’s clients with leading
edge research. More information is available at
Overall Performance and Accountability
During the quarter, CIBC took additional steps in support of its
commitment to maximize the value of its franchise. First, the company
announced the sale of its Guernsey private banking business to The Bank of
N.T. Butterfield & Son Limited. The sale generated an after-tax gain of $22
million and is consistent with Wealth Management’s strategy to focus on
supporting its North American client base and growing its Caribbean and Asian
Second, CIBC announced it is in advanced discussions with Barclays PLC,
one of the largest financial services groups in the United Kingdom, to combine
the retail, corporate and offshore banking operations of both companies in the
Caribbean into a new entity called FirstCaribbean International Bank(TM).
Under the proposed transaction, which is expected to close early next year,
CIBC and Barclays would each own approximately 45% of the new entity, with the
remainder held publicly. CIBC believes the future earnings potential from its
interest in FirstCaribbean will be greater than continuing with a controlling
interest of a smaller operation.
“Our outlook for the fourth quarter remains cautious, particularly in
light of market conditions in North America,” said Hunkin. “Our focus moving
forward will be to, above all, continue to focus on our customers’ needs; all
our businesses are getting more competitive and we have to be even more
proactive and creative to grow revenue. Also, we will defer all non-essential
spending, but continue to make selective strategic investments, striking the
right balance between short term earnings strength and longer term value
FINANCIAL AND OPERATIONS COMMENTARY – OVERVIEW
CIBC’s third quarter Operating Earnings, as noted in the following table,
were $525 million, down $117 million from the third quarter of 2000 and up $31
million from the prior quarter. Operating Earnings for the quarter were lower
than a year ago due to the effects of continued weaker markets, which were
partially offset by a greater proportion of income being earned in
subsidiaries that operate in lower tax jurisdictions. The improvement in
Operating Earnings from the prior quarter reflects stronger results in
Electronic Commerce and CIBC World Markets. Operating EPS, diluted, were
$1.29, down from $1.54 in the same quarter last year and up from $1.19 in the
prior quarter. Operating Return on Equity was 20.0%, compared with 25.5% in
the third quarter of 2000 and 19.4% in the previous quarter.
Reported Earnings were $460 million for the quarter, down $141 million
from the same quarter a year ago and down $9 million from the prior quarter.
Reported EPS, diluted, were $1.12, down from $1.43 in the third quarter of
2000 and comparable to $1.13 in the prior quarter. Reported Return on Equity
for the quarter was 17.4%, compared with 23.8% in the same quarter last year
and 18.4% in the prior quarter.
Reported Earnings for the nine months ended July 31, 2001 were $1,444
million, down $284 million from the same period in 2000. Reported EPS,
diluted, and Reported Return on Equity for the nine months ended July 31, 2001
were $3.51 and 18.6% respectively, versus $4.06 and 23.5% for the same period
FINANCIAL AND OPERATIONS COMMENTARY – SEGMENTED
CIBC’s management structure has four business lines — Electronic
Commerce, Technology and Operations; Retail and Small Business Banking; Wealth
Management; and CIBC World Markets. These business lines are supported by four
functional groups — Treasury and Balance Sheet Management (TBM); Risk
Management; Administration; and Corporate Development.
In 2000, CIBC introduced the Manufacturer / Customer Segment /
Distributor Management Model to measure and report the results of operations
of the four business lines. Under this model, internal payments for sales
commissions and distribution service fees are made between business lines. As
well, revenue and expenses relating to certain activities (such as the
payments business described under Electronic Commerce) are fully allocated to
other business lines. In addition, the revenue and expenses of the four
functional groups are generally allocated to the four business lines. This
model allows management to better understand the economics of our customer
segments, our products and our delivery channels.
In 2001, CIBC continued to refine certain estimates and allocation
methodologies underlying the model. Key changes include refinements to
customer segmentation and cost recovery methodologies. These changes primarily
affected Imperial Service in the Wealth Management business line and both
retail banking and small business banking in the Retail and Small Business
Banking business line.
Prior year segmented financial information has been restated to conform
with the presentation used in 2001. In 2001, the sales and service fees paid
to segments for certain products were renegotiated among the business lines.
Prior year financial information was not restated to reflect these fee
Business line return on equity is measured using risk-adjusted (economic)
capital which in many instances may be different from regulatory capital. The
difference between economic capital allocated to the business lines and
regulatory capital is held in Corporate and Other. From time to time
enhancements are made to CIBC’s economic capital model as part of our risk
measurement process. These changes are made prospectively.
Net income for the quarter was $47 million, down $12 million from the
third quarter of 2000 due to higher Amicus spending to support customer growth
and increases in the provision for credit losses, partially offset by strong
revenue growth in cards and mortgages. Net income was up $14 million from the
prior quarter, after excluding the second quarter after-tax gain of $43
million from the sale of the Merchant Card Services business. The increase was
primarily due to strong revenue growth in cards and mortgages, partially
offset by higher spending in Amicus. Excluding the gain, net income for the
nine months ended July 31, 2001 was $139 million, down $32 million from the
same period in 2000.
Revenue was $497 million, up $72 million from the third quarter of 2000,
and up $58 million from the prior quarter after excluding the pre-tax gain of
$58 million from the sale of the Merchant Card Services business. Revenue,
after adjusting for the gain, was $1,392 million for the nine months ended
July 31, 2001, up $157 million from the same period in 2000.
Revenue details are as follows:
– Mortgages includes both residential and commercial mortgages. Revenue
was $130 million for the quarter, up $49 million from the third
quarter of 2000 due to a 12% increase in residential loan balances
outstanding and improved spreads. Revenue was up $22 million from the
prior quarter due to an increase in prepayment interest amounts
related to refinancing, a 4% increase in residential loan balances
outstanding and three extra days this quarter versus the prior
– Cards comprises a portfolio of credit cards. Revenue was $266 million
for the quarter, up $20 million from the third quarter of 2000
primarily due to a 19% growth in average balances under administration
and lower cost of funds, partially offset by the loss of revenue from
the sale of the Merchant Card Services business. Revenue was up $12
million from the prior quarter after excluding the gain. This was due
to a 3% increase in average balances under administration, an 18%
increase in purchase volumes, lower cost of funds and three extra days
in the quarter, which more than offset the loss of ongoing revenue
from the Merchant Card Services business.
– Insurance provides creditor insurance products. Revenue was $13
million in the quarter, down $33 million from the third quarter of
2000 due to discontinued insurance businesses, partially offset by
growth in creditor insurance revenue. Revenue was comparable to the
– Other includes Amicus, electronic and self-service banking, the
allocation of a portion of treasury revenue and INTRIA third-party
technology services. Revenue was $88 million in the quarter, up $36
million from the third quarter of 2000 and up $23 million from the
prior quarter. The increase in revenue reflects higher treasury
revenue and Amicus growth.
Non-interest expenses were $354 million, up $63 million from the third
quarter of 2000 as a result of Amicus business growth, partially offset by
lower expenses related to discontinued insurance businesses. Non-interest
expenses were up $25 million from the prior quarter due to Amicus growth, and
the timing of Technology and Operations allocations to the business lines. Non-
interest expenses for the nine months ended July 31, 2001 were $999 million,
up $120 million from the same period in 2000.
The regular workforce headcount totaled 16,371 at quarter end, up 421
from the prior quarter in order to support business growth in Amicus and
mortgages. As well, staffing was increased in Technology and Operations, the
costs of which are allocated to the business lines. Headcount increases were
also experienced in electronic banking to improve service levels.
Developments in the quarter included:
– Amicus and Ahold USA, Inc., a leading food retail and food service
company, announced an intention to forge an alliance to provide
electronic banking services to the northeastern U.S. market through
ABMs, telephone call centres, the Internet and in-store pavilions.
– Amicus added 48 new pavilions during the quarter, increasing the total
number of pavilions operating to 378. Also during the quarter, Amicus
acquired 121,000 new customers, bringing the total number of
registered customers to 779,000, up 104% from the same quarter last
– Amicus commenced selling four index mutual funds and a money market
fund in Florida through its grocery store pavilions in Winn-Dixie
– CIBC continued to expand its extended speech recognition telephone
service within its retail banking network during the quarter. In
addition to being able to register and pay bills by phone using only
their voice, CIBC’s 2.9 million telephone banking customers will be
able to complete other voice-command transactions in the coming months
including: mortgage information requests, cheque reordering, as well
as receiving information on branch and bank machine locations.
– During the quarter, it was announced that Amicus and Yahoo! Inc. will
no longer provide person-to-person banking services on Yahoo! Inc.’s
U.S. website. Yahoo! Inc.’s decision to provide this service globally
did not align with Amicus’ strategy of a continued focus on core
retail businesses in North America.
Net income was $96 million, consistent with the third quarter of 2000 as
increased infrastructure investment more than offset higher revenue and a
lower provision for credit losses. Net income was down $4 million from the
prior quarter mainly due to increased infrastructure investment, partially
offset by higher revenue. Net income for the nine months ended July 31, 2001
was $324 million, up $40 million from the same period in 2000.
Revenue was $659 million, up $8 million from the third quarter of 2000.
The increase resulted from volume growth on personal deposits and consumer
loans and higher treasury revenue, partially offset by lower student loan
revenue, declining spreads on deposits and the effects of refinements to
segment revenue among the business lines. Revenue was up $26 million from the
prior quarter, primarily due to three extra days this quarter and higher
treasury revenue, partially offset by lower deposit spreads and the effects of
refinements to segment revenue among the business lines. Revenue for the nine
months ended July 31, 2001 was $1,950 million, up $40 million from the same
period in 2000 primarily due to volume growth on personal deposits and
Revenue details are as follows:
– Retail banking is the individual customer segment (customers other
than those in Imperial Service). Revenue is earned from sales and
service fees paid by CIBC’s product groups, primarily the investments,
deposits and lending products businesses. Revenue was $249 million in
the quarter, consistent with the third quarter of 2000. Lower deposit
spreads and the effects of refinements to segment revenue among the
business lines were offset by increased sales and service fees.
Revenue was up $5 million from the prior quarter due to three extra
days this quarter and higher sales and renewal fees, partially offset
by the effect of lower rates.
– Small business banking is the customer segment supporting small
owner-operated businesses, including owners’ personal holdings.
Revenue is earned from sales and service fees paid by CIBC product
groups, primarily the investments, deposits and lending products
businesses. Small business banking also includes bizSmart, which earns
revenue from net interest spreads. Revenue was $167 million in the
quarter, down $9 million from the third quarter of 2000 due to lower
deposit spreads and the effects of refinements to segment revenue
among the business lines. Revenue was up $7 million from the prior
quarter due to three extra days in the quarter.
– West Indies is a full-service banking operation in eight countries,
servicing all customer segments through a 45 branch network and
electronic delivery channels. Revenue is earned on net interest
spreads and sales and service fees. Revenue was $70 million in the
quarter, comparable with the third quarter of 2000 and the prior
– Lending products comprises personal (including student loans), small
business and agricultural lending portfolios. Revenue is earned
through net interest spreads and service fees; part of this revenue is
paid to the customer segments. Revenue was $155 million in the
quarter, unchanged from the third quarter of 2000. Improved consumer
and small business interest spreads and higher consumer loan volumes
drove revenue up, but this was largely offset by a $11 million
decrease in student loan revenue. Student loan revenue declined as a
result of a strategic business decision to exit risk share lending
programs when CIBC’s contract with the federal government expired last
year. Revenue was unchanged from the prior quarter as the effect of
three extra days was offset primarily by higher sales and renewal
– Other consists primarily of the allocation of a portion of treasury
revenue. Revenue was $18 million in the quarter, up $18 million from
the third quarter of 2000 and up $11 million from the prior quarter
largely due to higher treasury revenue.
Non-interest expenses were $485 million, up $38 million from the third
quarter of 2000 due to salary increases effective January 1, 2001, extended
branch hours, staffing of small business advisory teams and infrastructure
investment. Non-interest expenses were up $30 million from the prior quarter
primarily due to three extra days in the quarter and infrastructure
investment. Non-interest expenses for the nine months ended July 31, 2001 were
$1,372 million, up $79 million from the same period in 2000.
The regular workforce headcount totaled 13,143 at quarter end, up 216
from the second quarter with the additional headcount being primarily in
retail banking and small business banking.
Developments in the quarter included:
– CIBC and Barclays PLC announced that advanced discussions are underway
to combine their retail, corporate and offshore banking operations in
the Caribbean, to create FirstCaribbean International Bank(TM). Under
the proposal, which is subject to government and regulatory approval,
Barclays PLC and CIBC would each own approximately 45% of the ordinary
share capital of FirstCaribbean International Bank(TM), with the
remainder held publicly and with the intention to increase public
share holdings up to 20% as soon as practicable. FirstCaribbean
International Bank(TM) would retain the listings of CIBC West Indies
Holdings Limited in Barbados, Trinidad and Tobago and Jamaica.
– Effective August 1, 2001, the provinces of Ontario, Alberta and Prince
Edward Island entered into alternative arrangements for disbursing
student loans. CIBC continues to disburse student loans in the
provinces of Newfoundland, New Brunswick, and Quebec, and is protected
against credit risk exposure under these programs. As the various
student loan programs migrate to a direct lending program, CIBC
continues to leverage its investment in EDULINX Canada Corporation for
the servicing of student loans.
– For customer convenience, 86 branches across Canada have extended
business hours so far this year. By year end, this number is expected
to more than double and almost 30% of our branches will be open on
– Robbery prevention initiatives reduced branch robberies 38% year-to-
date compared with the same period a year ago.
– CIBC’s technology upgrade in retail banking continued, with the
installation of 1,090 upgraded counter workstations this quarter.
Year-to-date, 1,590 upgraded workstations have been installed in 330
branches. In the fourth quarter, we plan to install 678 more counter
workstations in 172 branches and will start the rollout of the new
Windows 2000 based technology platform in approximately 200 branches.
– Small Business Way, a training initiative which provides a
comprehensive small business banking accreditation program, was
introduced at the beginning of the quarter.
– Despite the current economic slowdown, impaired personal loans and
personal lines of credit are currently trending favourably versus the
prior two years, the result of enhanced front-end credit adjudication
and back-end collection processes. Small business and agricultural
impaired loans are trending consistently with the previous two years.
– Nine bizSmart kiosks were opened during the quarter (five in Alberta
and two in each of British Columbia and Ontario), bringing the total
to 37 bizSmart kiosks in operation at quarter end. As well, Personal
Line of Credit, which offers a credit limit up to $50,000 and an
interest rate of prime plus 1.75%, and Personal GIC were added to the
bizSmart product line. In addition, an Internet application for
business customers was also launched.
(1) The calculation of the asset growth rate was adjusted this quarter
to exclude assets that were converted to index mutual funds, at
CIBC’s discretion, in March, 2001.
Net income for the quarter was $90 million. Excluding an after-tax gain
of $22 million from the sale of the Guernsey private banking business, net
income was down $11 million from the third quarter of 2000 primarily due to
lower revenue. Net income, after adjusting for the gain, was down $7 million
from the prior quarter as a result of increased expenses. Excluding the gain,
net income for the nine months ended July 31, 2001 was $253 million, down $69
million from the same period last year due to lower revenue from retail
trading activities and expenses incurred to exit certain business operations.
The decrease was also due to higher than normal annual incentive fees earned
on risk-free participation in the profits of investment partnerships in the
Revenue for the quarter was $598 million. Excluding the gain, revenue was
down $54 million from the third quarter of 2000 as weaker market conditions
prevailed, and up $15 million from the prior quarter. Revenue for the nine
months ended July 31, 2001 was $1,772 million, down $343 million from the same
period in 2000, after adjusting for the gain, primarily due to lower annual
incentive fees and trading volumes.
Revenue details are as follows:
– Imperial Service is the customer segment offering financial advice to
CIBC’s high-value clients. Specially trained financial advisers
support the financial planning and product fulfilment needs of these
clients. Revenue is earned from sales and service fees paid by CIBC’s
product groups, primarily the investments, deposits and lending
products businesses. Revenue was $168 million in the quarter, up $23
million from the third quarter of 2000 due to business volume
increases and revenue allocations renegotiated during the year.
Revenue was up $8 million from the prior quarter.
– Private client investment and asset management generates fees and
commissions from full-service retail brokerage providing equity and
debt investments, mutual fund products, asset management services and
advisory and financial planning services to individuals in Canada and
the United States. Revenue was $256 million in the quarter, down $53
million from the third quarter of 2000 primarily as a result of lower
trading volumes. Revenue was down $11 million from the prior quarter
due to prevailing weaker markets.
– Global private banking and trust provides a comprehensive range of
global solutions, including investment management, trusts, private
banking and global custody to meet the financial management needs of
individuals, families and corporations with significant financial
resources. Revenue for the quarter was $53 million. Excluding the
gain, revenue was $31 million, down $9 million from the same quarter
last year due to the loss of ongoing revenue from CIBC Suisse S.A.
exited in the fourth quarter of 2000. Revenue, after adjusting for the
gain, was comparable with the prior quarter.
– Wealth products include mutual funds, investment management services,
online and discount brokerage services and GICs. These investment
products are developed and distributed to retail, small business and
Imperial Service customers. Revenue was $98 million in the quarter,
down $30 million from the third quarter of 2000. The decrease was due
primarily to lower discount brokerage revenue resulting from declines
in trading activity, as well as increases in the sales and service
fees paid to customer segments. GIC revenue decreased from the same
quarter last year due to narrower net interest margins, along with
increases in commissions paid to customer segments within CIBC.
Revenue was consistent with the prior quarter.
– Other consists primarily of the allocation of a portion of treasury
revenue. Revenue was $23 million in the quarter, up $15 million from
the third quarter of 2000 and up $11 million from the prior quarter,
due to increased treasury revenue.
Non-interest expenses were $488 million, down $26 million from the third
quarter of 2000 primarily due to revenue-related variable expenses. Non-
interest expenses were up $23 million from the prior quarter as a result of
increases in non-credit losses, legal expenses and recruitment expenditures.
Non-interest expenses for the nine months ended July 31, 2001 were $1,413
million, down $192 million from the same period in 2000 due to decreases in
variable expenses associated with lower revenue.
The Wealth Management regular workforce headcount totaled 6,722 at
quarter end, down 136 from the prior quarter primarily due to the sale of the
Guernsey private banking business.
Developments in the quarter included:
– CIBC Investor Services Inc. introduced a new website at
www.investorsedge.cibc.com to improve and simplify the online
investing experience for Investor’s Edge and Imperial Investor Service
clients. The new website has easy-to-use navigation with a host of new
features and functions including access to CIBC World Markets Canadian
equity research. A new online Alerts service allows clients to receive
personalized stock notifications to keep abreast of the latest
developments affecting their investment portfolios.
– During the quarter, CIBC sold its Guernsey private banking business to
The Bank of N.T. Butterfield & Son Limited in Bermuda for an after-tax
gain of $22 million. This transaction is consistent with CIBC Wealth
Management’s strategy of focusing on its North American client base
and growing its Caribbean and Asian operations.
– As at the end of June, CIBC Mutual Funds ranked second among the big
six banks in year-to-date net sales, and moved up to third among all
Canadian mutual fund companies. As at June 30, 2001, CIBC continues to
rank first in index fund net sales for fiscal 2001.
– Since its conversion to a multi-manager approach in May 2001, Personal
Portfolio Services (PPS), Canada’s leading discretionary investment
management program, achieved net sales of $53 million. Total assets
under management are $6.0 billion.
– CIBC Wood Gundy, CIBC’s Canadian full-service brokerage operation,
continues to focus on growing fee-based asset management programs.
Specifically, Investment Advisory Service increased net assets by $217
million, representing 155% growth, year-to-date.
Net income was $229 million, down $157 million from the third quarter of
2000 which had more robust market conditions and higher merchant banking
revenue. Net income was up $34 million from the prior quarter due to higher
revenue from origination activities. Net income for the nine months ended July
31, 2001 was $695 million, down $284 million from the same period in 2000.
Revenue was $1,066 million, down $233 million from the third quarter of
2000 and up $67 million from the prior quarter. Revenue for the nine months
ended July 31, 2001 was $3,241 million, down $412 million from the same period
Revenue details are as follows:
– Capital markets operates trading, sales and research businesses
serving institutional, corporate and government clients across North
America and around the world. Revenue was $365 million in the quarter,
up $19 million from the third quarter of 2000 and up $14 million from
the prior quarter. The increase was due primarily to the strong
performance of the fixed income business.
– Investment banking and credit products provides advisory services and
underwriting of debt, credit and equity for corporate and government
clients across North America and around the world. Revenue was $480
million in the quarter, up $82 million from the third quarter of 2000
due to increased leveraged finance activity, primarily in Europe.
Revenue was up $82 million from the prior quarter due to improved
leveraged finance conditions, combined with increased U.S. investment
– Merchant banking makes investments to create, grow and recapitalize
companies across a variety of industries. Revenue was $103 million in
the quarter, down $309 million from the third quarter of 2000 which
benefited from higher merchant banking divestiture gains. Revenue was
down $40 million from the prior quarter due to lower realized gains
net of asset write-downs.
– Commercial banking originates financial solutions centred around
credit products for medium-sized businesses in Canada. Revenue was
$125 million in the quarter, comparable with both the third quarter of
2000 and the previous quarter.
– Other includes the allocation of a portion of treasury revenue, net of
unallocated funding charges; CEF Capital, an affiliated Asian merchant
bank holding company; and other revenue not directly attributed to the
main businesses listed above. Revenue was $(7) million in the quarter,
down $29 million from the third quarter of 2000 due to higher treasury
related funding charges. Revenue was comparable to the prior quarter.
Non-interest expenses were $685 million, down $24 million from the third
quarter of 2000 as a result of lower revenue-based compensation expenses. Non-
interest expenses were up $59 million from the prior quarter primarily due to
variable compensation associated with higher revenue. Non-interest expenses
for the nine months ended July 31, 2001 were $2,025 million, down $101 million
from the same period in 2000.
The regular workforce headcount totaled 2,989 at quarter end, up 22 from
the prior quarter.
Developments in the quarter included:
– CIBC World Markets launched a new webcast facility, CIBC eTV, a
proprietary web-based online television station providing clients with
access to current research.
– CIBC World Markets held an official ground breaking ceremony at the
commencement of construction of its new U.S. headquarters to be
located at 300 Madison Avenue in New York.
– CIBC World Markets successfully initiated an equity arbitrage business
in Ireland. This business is expected to play an important role in our
strategy to expand into European equity markets.
– Divestiture of non-strategic facilities continued with the sale of
$316 million of performing loans, resulting in pre-tax charges of $23
million. CIBC World Markets, together with Treasury and Balance Sheet
Management will continue to explore opportunities in this area.
– CIBC World Markets participated in a number of significant
transactions in the quarter:
– Sole underwriter and lead arranger of a US$2.0 billion credit
facility to finance George Weston Limited’s acquisition of
Bestfoods Baking Company.
– Joint-lead arranger, joint bookrunner, documentation agent, and
security agent on a senior debt facility, as well as joint arranger
and administrative agent on a bridge facility for Apax Partners
& Co., and Hicks, Muse, Tate & Furst Inc.’s acquisition of Yell
Directories from British Telecommunications plc for pnds stlg 2.14
– Financial advisor, lead arranger and underwriter on Nomura
Principal Finance Group’s acquisition of Le Meridien from Compass
Group plc for pnds stlg 1.9 billion.
– Co-lead manager and underwriter in a commercial real estate
securitization offering of US$962 million.
Toronto-based CIBC reported yesterday that credit card revenue for the third fiscal quarter ending July 31 was $266 million, up $20 million from the same quarter of 2000 primarily due to a 19% growth in average balances and lower cost of funds. The gain was partially offset by the loss of revenue from the sale of the Merchant Card Services business. Revenue was up $12 million from the prior quarter after excluding the gain. This was due to a 3% increase in average balances under administration, an 18% increase in purchase volumes, lower cost of funds and three extra days in the quarter, which more than offset the loss of ongoing revenue from the Merchant Card Services business. CIBC realized an after-tax gain of $43 million from the sale of the Merchant Card Services business to Global Payments, Inc. Global agreed to purchase CIBC’s merchant acquiring business in November and closed on the transaction in March. Under terms of a ten-year marketing alliance with CIBC, Global will offer VISA credit and debit card payment products and services to merchants in Canada.
For more information on CIBC’s 2Q/01 results visit CardData ([www.carddata.com]) (CF Library 3/21/01)
Experian officially launched its online consumer credit management and credit education Web site today. CreditExpert.com features access to personal credit reports, credit scores, and monitoring services. Experian formed a joint venture with MD-based Encore Marketing International called Credit Expert LLC, which will manage CreditExpert.com. Credit Expert LLC will offer subscriptions to the new ‘Credit Manager’ service for $79 each.