Credomatic’s credit card businesses and banking operations in the Central American countries, with the exception of Panama, CIC is positioned to have one of the strongest financial franchises in the region. The group is a leader in the credit card business, while having a dominant market share in the acquiring and issuing businesses.
First Data announced its Board of Directors named Ed Labry interim CEO while it conducts a selection process. For continuity and stability, Ed’s experience and knowledge of the company will maintain its position in a dynamic electronic payments industry. Bringing with him almost 30 years’ experience in the payments industry- most of that time at First Data or one of its subsidiaries- Ed will ensure the company remains customer-focused with a drive to its 2013 objectives.
Credit card-related stocks took a hit yesterday after American Express reported that delinquencies and charge-offs rose during December as cardholder spending slowed. Earlier in the day Capital One reported that November showed a strong uptick in delinquencies and charge-offs. AmEx reported that delinquencies in its managed U.S. lending portfolio increased to approximately 3.2% in the fourth quarter from 2.9% in the third quarter, and that the charge-off rate in this portfolio increased to 4.3% from 3.7% for the same periods. Charge-offs for AmEx one-year ago stood at 3.5% according to CardData ([www.carddata.com]). Cardholder spending rose about 16% for the fourth quarter but the growth trailed off to 13% in December with particular weakness in U.S. billings. As a result, AmEx will take a pre-tax charge of approximately $440 million for the fourth quarter. This charge will raise worldwide lending reserves to one hundred percent of past-due loans and increase reserves related to the charge card portfolio. AmEx also is projecting worldwide billed business growth of approximately 8% to 10% for 2008. Charge-off levels in the managed U.S. lending portfolio are projected to average 5.1% to 5.3% for the full year. Capital One reported that its charge-off ratio for U.S. Cards climbed to its highest level in more than four years during November. Delinquency (30+ days) for its U.S. Cards also increased to its highest point since June 2003. (CF Library 1/10/08)
AMEX U.S. CHARGE-OFFS
Source: CardData (www.carddata.com)
Citi has completed the acquisition of substantially all of the subsidiaries of Grupo Cuscatlan. Under the terms of their agreement announced on December 13th Citi acquired Grupo Cuscatlan’s banking operations, some of its insurance operations, and other financial activities for $1.51 billion in cash and Citigroup stock. Grupo Cuscatlan serves more than 45,000 corporate banking customers and 1.2 million consumer banking customers through a distribution network of 202 branches and 263 ATM’s throughout the region. Mauricio Samayoa will remain CEO of Grupo Cuscatlan.
American Express said yesterday that its facts and analytics show that VISA’s claim that its affluent “Signature” product is outpacing all other payment brands does not make sense. AmEx says if VISA were actually outpacing all others in the affluent category, VISA’s share would be increasing and spending among AmEx premium cardholders would be slowing but this is not happening. AmEx says that over the past three years its spending per consumer “Centurion” account is up $75,000; “OPEN” charge cardholder spending is up $16,000; Starwood cobrand cardholder spending is up almost $10,000; and consumer “Platinum” cardholder spending is up more than $7,000 annually. AmEx noted that across its full product line, the number of consumer and small business accounts spending more than $50,000 per year has increased by 78%. AmEx says one thing is clear; that the alleged growth by VISA among affluent cardholders is not coming at its expense.
American Express said yesterday that it expects total managed writeoffs in the U.S. consumer and small business portfolios to be $175 to $250 million higher than the third quarter due to the bankruptcy surge in late September and early October. AmEx says this means higher total managed writeoffs of $200 to $275 million when compared against the fourth quarter of last year. AmEx says it fully writes off account balances upon notification of a valid bankruptcy filing and therefore the Company does not expect a material bankruptcy tail following it into January. AmEx says it believes bankruptcy trends will return to more historical levels once the pipeline is cleared by courts and it has already seen that new law filings are down substantially.
Metris reported that it filed a response to the recent SEC “Wells Notices” on August 2nd with the Midwest Regional Office of the SEC. Metris Companies Inc. offers credit cards, credit protection and insurance products to consumers nationwide. Metris issues credit cards through Direct Merchants Credit Card Bank, N.A., a wholly owned subsidiary in Phoenix, AZ.
Despite inroads by VISA and MasterCard into corporate card spending, American Express insists it has turned the corner. AmEx says that after several years of modest decline in corporate card share it is now outpacing the competition. AmEx’s current corporate card growth of 13% outperformed the combined 11% growth of the top 10 corporate bankcard issuers. AmEx noted that its total corporate card spending is more than 50% greater than the next 10 issuers combined. Overall, the average annual amount spent per basic account on U.S. proprietary cards was $10,700 in 2004, up from $9,600 a year earlier. More than half of the Fortune 500 provide AmEx cards to their employees for business expenses.
Kmart disclosed this week that it filed suit against Capital One last month in regard to its co-branded “Kmart MasterCard.” The complaint, filed in the U.S. District Court for the Eastern District of Michigan alleges breach of contract. Kmart also says Capital One failed to market and support a co-branded credit card. The “Kmart MasterCard” was launched in September 2000. The suit was filed against Capital One Bank, Capital One, F.S.B., and Capital One Services, Inc. The complaint alleges “breach of the covenant of good faith and fair dealing, unjust enrichment, promissory estoppel and tortious interference with business relationships and prospective economic advantage arising out of Capital One’s alleged failure to market and support the co-branded credit card.” Kmart says its seeking monetary damages.
The postal rate increase, which goes into effect next week, may be another incentive to push consumers into electronic bill presentment and payment services. In a recent Yankee Group survey, the firm found that among consumers showing interest in using EBPP services, 15% paid their bills online to save money on stamps. The research also found that people using online billing said their primary reasons were: convenience of eliminating writing checks every month (22%); to save time (19%); and, view bills online and keep a record of their bill (18%). Yankee says 8.9 million households pay bills online and it expects this number to nearly double by 2004. Yankee says it also found that a broadband-enabled household is almost two times more likely to pay bills online than a dial-up household.
After delaying the release of its earnings report, Providian reported a net fourth quarter loss of $395 million from continuing operations, compared to an operating profit of $225 million for 4Q/00. The company also confirmed Thursday that banking regulators have accepted its new ‘Capital Plan’. Despite the restructuring, Providian posted a strong fourth quarter as it focused on the middle-market segment, largely abandoning the sub-prime market. During 4Q/01, the company added 500,000 net new accounts and added $950 million to total managed credit card loans. The managed net credit loss rate was 12.70% in the fourth quarter, compared to 8.49% one year ago. The 30+ day managed delinquency rate was 8.81% at year-end 2001, compared to 7.54% at the end of 2000. In light of the loss trends, Providian beefed up its loan loss reserve by $252 million during the fourth quarter. Total loan loss reserves now stand at $1.93 billion at year-end. Providian also noted yesterday it has requested approval from regulators to merge Providian Bank into Providian National Bank. The company also indicated the sale of its credit card business in the United Kingdom is progressing on schedule, as well as the planned disposition of its operations in Argentina. The company has designated its foreign businesses as “discontinued” and as a result added $86 million to its fourth quarter loss. Providian is still seeking a buyer for $3 billion in high-risk accounts. Providian’s 4Q/01 portfolio stats were published in last Friday’s CardFlash. For complete details on Providian’s 4Q/01 performance visit CardData ([www.carddata.com]). (CF Library 1/11/02; 1/18/02; 2/01/02)
MIST Inc. announced that it has commenced deployment of its
FreedomGate transaction payment gateway. This gateway provides banks and
processors with direct connectivity to all of the major data communication
networks, particularly wireless networks, and enables them to manage these
connections with unprecedented ease and flexibility. Furthermore, MIST’s
gateway has more functionality and related software applications than any
similar product in the transaction payment industry.
MIST has also completed the development of its MIST Freedom III
desktop transaction terminal. Together with the MIST Freedom I and II
terminals, MIST now offers the most advanced and complete end-to-end
payment solution for banks and their merchant clients. The MIST Freedom
family of transaction terminals are all designed to take full advantage of
FreedomGate’s many features.
The MIST Freedom III transaction terminal has a large touchscreen and
contains a built-in ethernet port providing merchants with direct access to
the internet. The connectivity features enable merchants to significantly
reduce their communication and transaction processing costs. Moreover, the
expanded memory and large touchscreen enable banks and their merchant
clients to communicate interactively. Banks can now take advantage of
unparalleled terminal management features and simultaneously offer
merchants many value-added applications. These applications include time
and attendance, advanced reporting features, short text messaging, loyalty
and coupon programs, advertising and electronic storefront.
Net income for the nine months ended June 30, 2001 was $5.6 million,
or $0.18 per share, compared to a loss of $2.7 million or $(0.09) per share
in 2000. The increase is due to the $16.5 million gain realized on the sale
of the company’s card and imprinter manufacturing facilities. Net income
for the third quarter was $478 thousand, or $0.02 per share, compared to a
loss of $3.0 million, or $0.10 per share, in the prior year. The
improvement is due to a $5.0 million gain recorded on the sale of the
imprinter facility which closed during the quarter.
Revenue for the nine months ended June 30, 2001 was $6.6 million,
down substantially from $11.6 million last year. During the third quarter,
revenue was $2.6 million compared to $4.4 million last year. The decline in
revenue is due to a reduction in sales of traditional wired transaction
terminals. Banks and processors have reduced their capital spending in the
current economic slowdown and delayed product purchases as they plan for
the deployment of newer wireless terminals. MIST anticipates that sales
will recover towards the end of 2001 and into 2002.
The loss from continuing operations for the nine months ended June
30, 2001 was $12.4 million, and $4.3 million for the third quarter. This
loss is substantially greater than the prior year due to the sharp increase
in research and development costs and selling expenses predominantly
associated with the development of the Freedom III and the gateway. These
expenses totaled $5.4 million for the nine months and $2.2 million for the
Japanese Security Conference
During the quarter, MIST hosted a conference in Japan on security
issues involved in transaction payment processing in cooperation with VISA,
the TD Bank and the Canadian Embassy. This conference was well attended by
90 companies and institutions, including representatives of Japan’s largest
banks and telecommunication companies. The conference displayed the
technology that is used in Canada to protect the security of transaction
payments. This technology ensures that debit and credit transactions
processed in Canada are among the most secure in the world. MIST also
featured its payment gateway and, in particular, features imbedded in the
gateway that enhance network security.
Corporate Reorganization and Liquidity
During the quarter, MIST announced that it had deferred plans to sell
its card issuance business to its two major shareholders, and the related
special dividend payment to shareholders. This will conserve the company’s
cash for operating purposes.
In addition, Trilon Bancorp Inc., an affiliate of Trilon Financial
Corporation, one of MIST’s major shareholders, has agreed to revise and
extend MIST’s current credit facility, under which MIST owed approximately
$18.3 million as at June 30, 2001. The revised facility provides for
borrowing of up to C$22 million, a portion of which of which is due
December 31, 2001 and the remainder that is due in August 2002. The revised
facility bears interest at a floating interest rate and is secured by the
company’s and its subsidiaries’ assets. As part of the revision of the
facility, MIST will grant Trilon Bancorp Inc. a warrant to purchase 500,000
common shares of MIST at $1.25 per common share. Completion of this
transaction is subject to regulatory approval.
The company anticipates that revenues will increase later this year
and into 2002 as banks and processors begin to deploy FreedomGate(TM) and
the company’s new wireless transaction terminals. Product development costs
will be significantly reduced in the future as the gateway and Freedom
family of transaction terminals are now essentially complete.
About MIST Inc.
MIST Inc. is a leading provider of transaction payment solutions. The
company provides network connectivity and value-added applications through
its FreedomGate(TM) transaction payment gateway to banks, processors and
retail merchants. Through its facilities in Canada, the United States and
Japan, the company also manufactures and distributes transaction payment
terminals, including its innovative Freedom family of wireless transaction
terminals that maximize the functionality of FreedomGate(TM). For more
information, visit www.mistwireless.comor contact