NOV 04 DEBT

Credit card outstandings rose GBP 500 million during November to bring total card loans to GBP 57.6 billion, a slight gain over last year’s pace. Total net lending to consumers for November hit GBP 183 billion, an increase of GBP 1.4 billion over October. Overall, consumer credit grew 0.8% in November, seasonally adjusted, GBP 100 million weaker than the increase in October. The three-month (annualized) growth rate fell to 10.4% from 11.7% in October while the twelve-month growth rate fell to 11.7% from 11.8% in October. Gross advances were GBP 18.8 billion, GBP 200 million higher than the average three months to October. The Bank of England continues to maintain its benchmark interest rate at 4.75%.

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Monolines ROA Up 18 bps; CUs Slip 5 bps in 04

Credit card profits among monolines and banks rose significantly in 2004 as the average pre-tax ROA for credit union issuers fell slightly. Pre-tax card profits at monolines last year came in at 4.43% compared to 4.60% for banks. However, monolines, in real dollar earnings, not ROA percentages, still have the lion’s share of industry earnings, as they have held for many years. According to data compiled by R.K. Hammer Investment Bankers, pre-tax card profits at monolines last year rose 18 basis points while banks increased 7 basis points. Credit Unions delivered a pre-tax ROA of 1.00%, compared to 1.05% for 2003.

CREDIT CARD PRE-TAX ROA (%)
1998 1999 2000 2001 2002 2003 2004
Monolines: 4.61 5.59 4.56 3.23 3.83 4.25 4.43
Banks: 2.50 3.16 3.65 4.00 4.28 4.53 4.60
CUs: 0.90 0.95 1.10 1.00 1.10 1.05 1.00
Source: R.K. Hammer Investment Bankers

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Paymentech Certifies SLIM CD Payment Software

FL-based SLIM CD announced that its software has been certified on the Paymentech platform, supporting both card-swipe and keyed transactions. Transactions are generally processed in 2-5 seconds through Slim CD’s NetConnect connectivity to Paymentech, without requiring the merchants to have a leased line or dedicated Internet connection. The Slim CD package includes a desktop application, virtual terminal, and a choice of shopping carts. SLIM CD specializes in credit card processing software development for the desktop and the Internet.

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Arthur Blank Ranked as Top Gift Card Manufacturer

Boston-based Arthur Blank & Co. has been ranked as the leading manufacturer of non-bank, card marketing, and payment solutions. The “Nilson Report” ranked ABCO as #1 in their December report. Total gift card sales for the industry in 2004 reached $48 billion, up $6 billion from the year prior, and the TowerGroup projects total retail-based gift card sales topping $53 billion in 2005.

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Huntington Switches from Chase to MBNA

OH-based Huntington Bancshares has switched its agent credit card contract from Chase to MBNA and will now offer “WorldPoints” on a “Preferred,” “Platinum,” or “Quantum” VISA or MasterCard.” Prior to the alliance with MBNA, Chase Manhattan Bank USA had served as Huntington’s consumer and business card provider. Huntington Bancshares Incorporated is a $32 billion regional bank holding company headquartered in Columbus, Ohio.

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0% Card Offers Into 2006 Remain Popular

U.S. card issuers are continuing to offer 0% interest rates. Some top issuers are now offering 0% interest rates on purchase and balance transfers through April 2006, according to CardWatch (www.cardwatch.com). However, most of these offers are only available via the mail. Chase is offering 0% on purchases and balance transfers through April 06, on one of its “Platinum MasterCard” products. Chase is also waiving the fee for balance transfers with the offer. Citibank is offering a 0% rate on balance transfers though next April on its “Diamond Preferred MasterCard.” However, the 0% rate will expire in January 2006 unless you charge at least $100 in the first three months of the issuance, and “do not default under any card agreement.” Bank One’s (now Chase) “Reader’s Digest Platinum MasterCard’ is also offering a 0% rate on balance transfers and new purchases through next April. Other major issuers, such as Providian and U.S. Bank, also have 0% offers running into 2006, according to CardWatch ([www.cardwatch.com][1]).

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

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VISA Creates a Chief Commercial Officer Position

VISA International has hired Matthew Piasecki, formerly with Mercer Management Consulting, for the newly created position of Chief Commercial Officer, responsible for global strategy, consumer and commercial products, and innovation for VISA Worldwide Services, as well as acquisition/acceptance and operating regulations. Piasecki will be based in Foster City, California and will report to Christopher J. Rodrigues, President and Chief Executive Officer of Visa International. Prior to joining Visa International, Piasecki served as president of Map Management Consulting Ltd., assisting international clients with strategy, business design innovation and cross-border expansion. Visa is the world’s leading payment brand generating US$3 trillion in annual card sales volume.

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Australian Debit Card Use Hits a New Record

Debit card EFTPOS volume in Australia hit a record A$6.0 billion during October, an 8.8% increase over one-year ago. Over the past five years debit card dollar volume has doubled, according to CardFlash International. During October, Australians used debit cards for A$4.6 billion in purchases among 74 million transactions. Total EFTPOS transactions were 88.6 million for October. Over the past twelve months, Australians have used debit cards for A$67.7 billion in purchases and cash transactions. There are 25.0 million debit card accounts in the country at the end of October, compared to 24.4 million one-year ago.

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Private Label Cards to Stagnate Through 2006

Consolidation and stagnation will continue to be evident in the private label credit card business, according to a new report. The trend toward outsourcing private label cards will continue, with major third-party issuers like Citi Commerce and GE Consumer Finance positioned to acquire the few remaining sizable in-house portfolios. According to the TowerGroup study, between 1998 and 2003, private label receivables grew at a CAGR of 2.6% annually. The research firm expects this growth percentage to decline through 2006 to a more modest CAGR of 1.4%. Citi Commerce, GE Consumer Finance and Household now account for over 90% of total third-party issuer receivables in the USA. TowerGroup believes these top issuers will continue to grow since they offer competitive pricing based on scale. TowerGroup also expects ongoing robust activity in the cobrand and reward programs.

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Hudson & Keyse Hires Marketing & Sales Exec

Hudson & Keyse, a purchaser of charged-off consumer bank debt, has hired John Reid as VP of Marketing & Sales. John will be responsible for business development and account management for clients. Hudson & Keyse, L.L.C., a leading purchaser of charged-off consumer bank debt, analyzes and prices both geographic and national debt portfolios in the consumer credit card and unsecured loan verticals.

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Illinois AG Sues Two Catalog Credit Card Firms

The Illinois Attorney General has filed a lawsuit against FL-based Latin Card Plus and Pro Line Card for an alleged deceptive catalog credit card offer. Madigan’s two lawsuits ask the court to prohibit the defendants from offering for sale and selling credit cards or credit card services in Illinois. In addition, the lawsuits ask the court to assess civil penalties of $50,000 and additional penalties of $50,000 per violation found to be committed with the intent to defraud. Finally, Madigan’s lawsuits ask the court to order the defendants to pay restitution to the consumers as well as the costs of the investigations and litigation.

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