Capital One reported that its profits declined for the fourth consecutive quarter, however, compared to 4Q/02 the issuer’s profits are up 10.8%. For the fourth quarter, Capital One posted net income of $265.7 million, compared to a revised $275.5 million in the third quarter, $286.8 in the second quarter, and $309.1 million in the first quarter of 2003. During the fourth quarter, Capital One grew its managed loan portfolio by $4.0 billion and its domestic card loans by nearly $2.0 billion, compared to the previous quarter. Year-over-year, Capital One’s managed loans have increased 19.3%, and U.S. card loans have risen 13.3%. Marketing expenses for the fourth quarter declined $25.9 million since the third quarter to $290.1 million. One year ago, Capital One spent $210.8 million in marketing expenses. Capital One added 632,000 net new accounts, ending the quarter with 46.7 million accounts. The managed charge-off rate declined to 5.32% in the fourth quarter, from 5.44% in the previous quarter, and 6.21% for 4Q/02. The net charge-off rate for U.S. credit cards was 6.16% for both the fourth and third quarters, and 6.90% one-year ago. The managed delinquency rate (30+ days) declined to 4.46% from 4.65% at the end of the previous quarter. One year ago delinquency was 5.60%. The managed delinquency rate (30+ days) for U.S. credit cards was 4.60% for the fourth quarter and 4.88% at the end of the previous quarter. One year ago delinquency was 6.07% for U.S credit cards. At the end of the fourth quarter Capital One had $46,279,000,000 in U.S. card loans. For complete details on Capital One’s fourth quarter performance visit CardData ([www.carddata.com]).
Two top issuers are coming together to form the largest general purpose credit card issuer and the third largest signature debit card issuer in the USA. J. P. Morgan Chase and Bank One announced plans yesterday afternoon to merge, creating a $125 billion credit card portfolio and $20 billion debit card portfolio. The combined portfolios will serve 95 million credit cardholders and nearly 9 million debit cardholders. The merger will unseat Citibank as the nation’s largest credit card issuer. At the end of the third quarter, Citibank had about $117 billion in North American credit card outstandings. Citibank has an estimated $103 billion in U.S. credit card outstandings. During the fourth quarter Citibank purchased the Sears credit card portfolio which included approximately $13 billion in MasterCard receivables. Even with the Sears acquisition, Citibank will fall behind the Chase/Bank One portfolio. Bank One currently ranks as the nation’s #3 credit card issuer and Chase ranks as #5. In debit cards the combined portfolio will fall just behind Bank of America and Wells Fargo. The Chase/Bank One portfolio will produce more than $2 billion in credit card profits annually. Over the past twelve months, Bank One has generated $1.13 billion in credit card profits. Both credit card portfolios have been lackluster until recently. Chase reported in third quarter that its outstandings were flat year-over-year, but overall performance metrics were improving. Chase also added 300,000 credit card accounts during the third quarter. Bank One’s third quarter card profits were down 4% over the previous year, but up 2% over the previous quarter. Bank One has been rebuilding its card portfolio over the past two years after its First USA unit tumbled. During 2003, Bank One launched several major co-branded credit cards in partnerships with Disney, Starbucks and Avon.
TOP CREDIT CARD ISSUERS
(as of 9/30/03)
ISSUER RECV CARDS
1. Citibank* $117.4b 105.9mm
2. MBNA $ 81.8b 73.4mm
3. Bank One $ 74.2b 53.0mm
4. Capital One $ 52.5b 48.3mm
5. JPM/Chase $ 50.3b 41.9mm
6. Discover $ 50.0b 50.0mm
7. Amer Exp $ 35.9b 36.2mm
8. Bank of Amer $ 33.6b 25.7mm
9. Household $ 17.6b 30.1mm
10. Providian $ 17.0b 9.7mm
*Citibank includes other non-US North American accounts
Source: CardData (www.carddata.com)
TOP DEBIT CARD ISSUERS
(as of 9/30/03)
ISSUER VOL CARDS
1. Bank of America $43b 18.0mm
2. Wells Fargo $26b 15.0mm
3. Wachovia $16b 5.0mm
4. Bank One $13b 5.0mm
5. U.S. Bancorp $12b 5.0mm
Source: CardData (www.carddata.com)
Saks has signed a three-year contract extension for credit card processing services from Fifth Third Bank Processing Solutions. Saks is operating 378 stores in 39 states with nearly $6 billion in annual revenue. Fifth Third Bank Processing Solutions processes 8.2 billion ATM and POS transactions per year for more than 197,000 retail locations and financial institutions worldwide, including The Kroger Co., AutoZone, Abercrombie & Fitch, Nordstrom, Inc. and The Finish Line. Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio.
Capital One yesterday launched a new air miles card offering low redemption levels. The new “Go Miles VISA or MasterCard” reimburses cardholders for buying a plane ticket on the card. Under the program, cardholders shop for the lowest fares and most convenient itineraries, charge the ticket to the card, and then receive a cash credit for the ticket based on previously earned miles. Capital One says the new program takes the hassle out of free travel since it does not use set mileage plateaus. Reimbursements can be earned with as few as 9,000 miles. To receive a $100 credit, 9,000 miles are required; 15,300 miles for a $170 credit, and, 19,800 miles for a $220 credit. The “Go Miles” card carries a $19 annual membership fee and interest rates that start at 9.9%. Cardholders can earn up to 5,000 bonus miles for transferring balances. The Air Travelers Association this morning ranked the card as #1 due to lower annual fee and 9,000 minimum redemption level. However, the nominal value of the miles under the “Go Miles” program is 1.1 cents each compared to 2.5 cents per mile for co-branded airline programs.
WV-based Star USA Federal Credit Union has signed an agent contract with MA-based Encore Merchant Services. Encore Merchant Services will handle account application and establishment, point-of-sale terminal deployment, product development, customer service, and risk management services. Encore is a division of Primax Payment Systems. Primax has over 5,000 merchants located in 48 states. ENCORE was organized to provide ATM/Debit card routing and other electronic services for the credit union community. Currently ENCORE has in excess of 6 million transactions monthly.
Capital One’s CEO Richard Fairbank will receive more than 700,000 shares, with a current market value of $42 million, as part of his 2004 compensation package. The issuer’s “Compensation Committee” of its Board of Directors this week approved granting CEO Richard Fairbank 360,000 stock options and up to 355,410 performance-based shares of Capital One’s stock. Fairbank, along with former Capital One senior executive Nigel Morris, previously waived salary and benefits in exchange for stock options and stock performance bonuses. The COF Committee says the compensation program “reflects the issuer’s continued commitment to aligning the interests of its Chairman/CEO with those of its stockholders through a balanced compensation program designed to encourage management decisions that increase stockholder value over the long term.” The stock options granted Fairbank this week have an exercise price of $56.275, and will vest annually in three equal installments beginning on December 15, 2004 and will expire ten years from the date of grant. The actual number of performance-based shares to be issued will depend on Capital One’s fully diluted compound earnings per share growth rate compared with that of a peer group of 33 companies over the three-year period beginning January 1, 2004 and ending December 31, 2006. Nigel Morris is in the process of leaving Capital One by April. He is currently dumping up to 3 million shares of COF common stock within the next year. After completion of the stock sales, he will own approximately 3.3 million options to purchase shares of COF common stock. One year ago, Fairbank’s exercisable options declined in value from $262 million to $104 million. Morris’ options decreased in value from $150 million to $57 million. (CF Library 4/22/03; 8/7/03)
Capital One reported Thursday that its “National Mascot of the Year” competition has received more than 3.5 million votes to-date as it approaches its end on December 22nd. While the BCS can’t seem to offer one undisputed national football champion this year, Capital One is at least offering one true BMOC (Big Mascot On Campus) on Jan. 1, 2004. The Capital One National Mascot of the Year will be selected based on a combination of the online popular vote (50 percent) and an expert panel of judges’ previous rankings (50 percent), which were used to select the 12 members of the Capital One All-America Mascot Team. Capital One Financial Corporation is a holding company whose principal subsidiaries, Capital One Bank and Capital One, F.S.B., offer consumer lending products and Capital One Auto Finance, Inc., which offers auto loan products.
Northern Virginia’s Inova Health System has deployed the “FreedomPay” cashless payment and loyalty solution at their hospital facilities, that includes 13,000 employees. Employee dining and vending facilities will now offer FreedomPay’s “tap and go” cashless payment and loyalty solution. National brands participating at Inova Health System include; Pizza Hut, Blimpies, Coca Cola and Starbucks Coffee. Inova Health System joins a growing list of leading hospitals, Fortune 1000 corporations, universities, the Government and Military who are experiencing the benefits of cashless retail environments. Inova Health System is a not-for-profit health care system based in Northern Virginia that consists of hospitals and other health services including emergency and urgent care centers, home care, nursing homes, mental health and blood donor services and wellness classes. FreedomPay, Inc. is the world leader in business process outsourcing to the nation’s largest hospitality food service providers, Fortune 1000 corporations, healthcare facilities, universities, sports and entertainment, and the military delivering a global infrastructure for world class payment, loyalty and settlement services.
The nation’s second largest issuer of sub-prime bank credit cards has teamed with a San Francisco-based non-profit consumer advocacy group to warn consumers about the long-term negative impact of filing personal bankruptcy. Capital One and Consumer Action have developed a guide, “Your Right to a Financial Fresh Start”, that discusses the legal process and implications of filing bankruptcy. Consumer Action says the guide provides a checklist of questions consumers should be asking themselves before they consider declaring bankruptcy. Capital One says the pamphlet is designed to guide consumers through the complexities and help them fully understand — and hopefully avoid — the serious measure of filing bankruptcy. The document is available in English, Spanish, Chinese, Korean or Vietnamese. Capital One and Consumer Action have formed an extensive relationship. Both concerns have been holding consumer financial management seminars for non-profit community groups this year throughout the country. (CF Library 11/19/03)
Capital One and Consumer Action have scheduled a two-day seminar for 80 non-profit community groups in Washington, DC on November 20th. The two-day seminar will kick off in Washington DC on November 20, 2003 and will focus on six areas of financial management for clients of community groups: banking, budgeting, understanding credit, credit repair, understanding bankruptcy and talking to teens about money. Capital One Financial Corporation is a holding company whose principal subsidiaries, Capital One Bank and Capital One, F.S.B., offer consumer lending products. Consumer Action is a non-profit, membership-based organization founded in San Francisco in 1971. Consumer Action serves consumers nationwide by advancing consumer rights, referring consumers to complaint-handling agencies and publishing multilingual educational materials.
TransCore has rolled-out a patented ATM-like machine that dispenses RFID transponder tags via credit cards, debit cards and cash payment for the electronic toll collection industry. The new “TagTeller” also provides customers with automated account management including the replenishment of an existing account, changing account information, obtaining a statement or balance, paying violations and performing various routine account management tasks. TransCore is providing several configurations of the machine for indoor, outdoor, drive-up, walk-up and in-lane use. The back office network supporting the machines will also enable a range of temporary and permanent account formats, both pre-paid and auto-replenishing. The machine can also dispense various types of tags including low-cost, paper-thin transponder tags. TransCore’s Amtech technology offered the first electronic toll collection technology, the first paper-thin windshield sticker tag, the first electronic vehicle registration tag.