ROAA Stays Healthy Despite Portfolio Metrics

Despite the uptick in recent delinquency and charge-off figures, U.S. bank credit card issuers are realizing a solid period of returns on average assets. During January the ROAA hit 2.66%, the highest level in more than five years, according to CardData ([www.carddata.com][1]). Rising cardholder fees, interest rates that move within 30-days of the Fed short-term interest adjustments and building balances have been key drivers to the new age of profitability. CA-based R.K. Hammer recently reported that return-on-assets for credit card portfolios for 2006 is projected to rise to 4.6%, compared 4.3% for 2005, and 4.5% for 2004. “Return on Average Assets” (ROAA) (%) is determined by dividing the after-tax return ($) by the average managed card outstandings ($) and then annualizing.

Return on Average Assets
Jan 06: 1.11%
Feb 06: 1.98%
Mar 06: 2.46%
Apr 06: 2.40%
May 06: 2.37%
Jun 06: 2.34%
Jul 06: 2.41%
Aug 06: 2.44%
Sep 06: 2.51%
Oct 06: 2.53%
Nov 06: 2.59%
Dec 06: 2.62%
Jan 07: 2.66%
Note: Excludes American Express and Discover.
Source: CardData (www.carddata.com)

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

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DEC DEBT

Credit card debt soared to a new record, almost hitting A$39.0 billion in December. However, credit card volume inched up by only 5.6% year-on-year. Credit card limits reached a new high at A$103.7 billion, marking the fourth consecutive month of A$100+ billion. Card volume set a new record at A$17.1 billion during December, compared to a previous record of A$16.5 billion set in August, according to the Reserve Bank of Australia. During the past twelve months, credit card debt has increased 13.7% in Australia. For December, credit card balances increased about A$1.0 billion from the previous month. One-year ago credit card debt stood at A$34.3 billion. Gross dollar volume on credit card and charge cards was A$16.2 billion one-year ago. There are currently 13.3 million credit card and charge card accounts in Australia, compared to 12.6 million one-year ago.

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PG&E Offers Customers VISA Payment Options

Pacific Gas and Electric is now accepting VISA online to make automatic monthly payments or one-time payments using VISA-branded debit, credit or prepaid cards. Under the no-fee pilot program, PG&E residential customers can schedule monthly payments or make one-time payments for their utility bills online. PG&E is one of the country’s largest providers of natural gas and electric service and is the nation’s largest utility company to offer its residential customers the option of using a Visa card for their monthly payments. PG&E joins more than 3,500 utilities across the U.S. that participate in VISA’s bill pay program.

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Security Breach is Uncovered in RI & MA

New England’s Stop & Shop says there was possible fraudulent activity associated with credit and debit cards used at two of its stores in Rhode Island. The store says it discovered tampering of one checkout lane EFT in two stores. Immediately following this discovery, Stop & Shop began working with local police departments and the US Secret Service to determine the extent of the crime. Stop & Shop’s investigation also discovered evidence of tampering at three other stores in Rhode Island and one in Massachusetts. However, no fraudulent transactions relating to debit or credit cards used at these store locations have been reported to Stop & Shop.

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ALCU Offers Security Breach Response

The Alabama Credit Union League has implemented a new Security Breach Response program to 81 of its participating member credit unions at no cost. The ACUL has partnered with Identity Theft 911, a provider of identity theft resolution and educational services. Federally regulated credit unions are required to maintain written policies and procedures, all subject to audit, which outline their response to a security breach or database compromise. A participating member of the credit union will receive consulting services, identity theft resolution services, secure communications and media interface.

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First Data and TCF Expand Relationship

First Data and MN-based TCF National Bank have formed a new revenue sharing alliance. The alliance will allow TCF Bank to offer industry-leading merchant services to its business customers through an expanded portfolio of electronic payment products and services, including credit, debit, check and gift card programs. First Data will provide merchant payment processing services on behalf of TCF Bank. TCF Bank is a subsidiary of TCF Financial Corporation, a $14.3 billion national financial holding company.

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Consumers Get Too Much Irrelevant Mail

A new survey has found that 88% of financial consumers claim to receive regular communications for products and services that are not directly relevant to them and their circumstances and 58% claim to regularly receive communications selling them products and services they already have with that company. The research also discovered that 64% of financial consumers claim they are more likely to stop using companies that regularly send them inaccurate or irrelevant communications material and 65% of financial consumers don’t feel like they are being treated as an individual with regard to the communications they receive. StreamServe says the results show that firms are missing a tremendous opportunity to enhance customer value by failing to communicate with their clients in a relevant, personal manner. Survey results also indicate that the majority of financial services companies fail to effectively communicate and market products and services to existing customers, causing these organizations to miss an opportunity to increase revenue and improve customer service. Seventy-four percent of respondents indicate they would be more likely to buy products and services from financial companies if the offers were highly personalized, relevant and treated them as individuals.

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Global Analytics Hires Fair Isaac’s Crooks

Global Analytics has hired Ted Crooks as VP of Business Development. Crooks specializes in inventing and leading development of fraud solutions. Previously a VP at Global Fraud Solutions for Fair Isaac Corporation, Crooks rejoins former colleagues from HNC Software which was acquired by Fair Isaac in 2003 to become its fraud organization. Crooks will continue to work on new fraud challenges, but will also spend considerable effort on improving entrepreneurial credit systems in developing economies and credit expansion to the under-served. Global Analytics applies mathematics and artificial intelligence to solve problems for business, education and government.

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BBVA to Buy Alabama’s Compass Bancshares

AL-based Compass Bancshares has signed a definitive agreement under which Banco Bilbao Vizcaya Argentaria will acquire Compass for a combination of cash and stock for $9.6 billion. Compass, the 36th largest U.S. bank credit card issuer, has about $550 million in credit card outstandings at year-end 2006. According to CardData (www.carddata.com), Compass has about 330,000 bank credit card accounts with 160,000 active customers. At the end of 2006, Compass had nearly 340,000 cardholders. BBVA, which operates in 35 countries, is based in Spain and has substantial banking interests in the Americas. Upon completion of the transaction, Compass will rank among the top 25 banks in the U.S. with approximately $47 billion in total assets, $32 billion in total loans and $33 billion in total deposits.

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Veritec and Datacard Group Integrate

Minneapolis-based Veritec has entered into a long-term value-added re-seller agreement with Datacard Group. Datacard “ID WorksIdentification” Software is now VSCode-enabled and Datacard products will play a vital role to enhance and expand Veritec’s “VSCard” technology in reference to both positive identification for ID card-holders as well as VISA debit-card security. Veritec is a provider of microprocessor-based encoding and decoding system products that utilize Matrix Symbology or 2-Dimensional Barcode technology.

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VISA Signature Gets Special Golf Access

VISA USA has entered into an agreement to give VISA Signature cardholders special access to Pinehurst Resort in North Carolina, known as the “Cradle of American Golf” and one of the top ten U.S. golf destinations and the historic Old Course at St. Andrews, Scotland. Pinehurst is comprised of eight championship golf courses and has been the site of more single championships than any other course in the United States. VISA Signature cardholders can enjoy tee time access on Pinehurst No.2, site of the 2005 U.S. Open Championship each time they stay at the resort. Through Pinehurst’s special relationship with St. Andrews and The Old Course Experience, VISA Signature cardholders also have access to a round on the fabled Old Course, site of the 2007 British Open Championship.

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TNB Acquires A+ FCU Credit Card Portfolio

Austin-based A+ FCU has teamed with TNB Card Services to issue credit cards. Through the issuing partnership, TNB acquires the $16 million card portfolio of A+, which includes more than 9,000 cardholders. The 76,000-member, education-based credit union has eight branches covering 10 counties in central Texas. TNB Card Services serves more than 450 financial institutions and manages more than 1.6 million cards. TNB Card Services recently reported it acquired 21 credit card portfolios from credit unions in the U.S. last year. TNB, or Town North Bank, has nearly an estimated $1 billion in credit card outstandings and approximately 900,000 accounts at the end of 2006. NH-based Brookwood Capital brought the two parties together. (CF Library 1/22/07)

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