Sears Portfolio

The first round of bids for the Sears credit card portfolio are expected this week. Among those considered bidders: GE, Citigroup, and HSBC. Sears announced in late March that it is looking to unload its $29.6 billion credit card portfolio. The company says that even though its credit card business generated more than $1.5 billion of operating income last year, and produced more than 60% of total profits, it wants to focus on its core retail business. Sears’ Retail-related businesses delivered $1.2 billion in operating income in 2002. Sears’ Credit-related business includes $17.2 billion in “Sears Card” receivables, as well as $12.4 billion in MasterCard receivables. The company has 25 million active accounts, according to CardData. In the first quarter, net charge-offs rose to 6.11% compared to 5.43% one year ago. Delinquency also increased from 7.31% for 1Q/02 to 7.87% for the first quarter of this year. Sears also reported that its net interest margin dropped from 14.69% to 13.75% and that its yield on all credit cards declined from 18.64% for 1Q/02, to 16.94% for 1Q/03. For complete details on Sears first quarter performance visit CardData ([www.carddata.com][1]).

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

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IN-HOUSE EMV CARDS

Datacard Group and VISA International have teamed to offer turnkey EMV smart card personalization packages to geographic markets outside the USA and to banks that are migrating to “Visa Smart Debit/Credit.” The new solutions are aimed at member banks wanting to control the personalization process in-house. Packaged services include consulting, project management, key management set-up, hardware and software installation, testing, training and ongoing support. Datacard is the first vendor to join the “Visa Smart Breakthrough Turnkey Personalization Program” offering VISA member banks two scalable personalization solutions. One is a high-end solution for members with existing “Datacard” equipment who want to add smart card capabilities; the other is a desktop-based issuance solution for low volume card issuers. Both solutions, built on “GlobalPlatform” standards for investment protection, will allow VISA member banks to upgrade their existing Datacard hardware and software so that they can personalize EMV smart cards. There is a predefined package price for each solution.

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Options MasterCard

Canadian Tire Corporation reported this week that it converted more than 21,000 new “Options MasterCard” accounts from retail cards during the first quarter and that more than 157,000 new accounts were generated through the in-store card acquisition program. Currently, CTC’s Financial Services manages more than 2.5 million “Options MasterCard” accounts, which is 44% higher than a year ago. These accounts make up more than 85% of Canadian Tire’s gross credit charge receivables. Financial Services plans to add at least 600,000 new accounts by the end of 2003 and convert the remaining 230,000 qualifying retail card accounts to the “Options MasterCard.” CTC’s Financial Services business had net credit charge receivables at the end of the first quarter of $1.86 billion, a 36.7% increase over 1Q/02. For complete details on Canadian Tire’s 1Q/03 performance visit CardData

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AEROPLAN DEAL

CIBC has boosted its offer by 24% for the purchase of “Aeroplan” air miles from Air Canada for its “Aerogold VISA” credit card program. However, CIBC also agreed to permit another credit card issuer to participate in the “Aeroplan” loyalty program in Canada. The new contract extension offer came on the day the bankruptcy court was to review bid offers made by several other credit card issuers interested in tying “Aeroplan” miles to their credit card programs. The new CIBC contract offer will also extend the “Aeroplan” relationship to 2013. Additionally, CIBC will hold to its previous commitment to make a $350 million loan to Air Canada as a prepayment for “Aeroplan” miles. Upon the new contract taking effect, CIBC will become an unsecured creditor of Air Canada for this unamortized balance and expects to take a charge of 23 cents a share on an after tax basis in the second quarter. Justice James Farley agreed to support the revised proposal to renew the “Aeroplan” contract between CIBC and Air Canada. Air Canada filed for bankruptcy protection April 1st.

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PAYSTAR DEAL

Madrid-based Xtra Telecom S. A. has signed an agreement with PayStar Corporation whereby Xtra Telecom will market PayStar SHS’ “Application Development Software” and new “Server View 1.4 Advantage” VRU software to European customers. PayStar Corporation is comprised of three fully integrated divisions: PayStar GLOBALCash, Inc. supplying prepaid ATM and MasterCard card products and services, PayStar InfoStations, Inc. providing Internet enabled single and multi-use kiosks and PayStar SHS, Inc. providing commercial telephony hardware and software switch services.

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GM Cards

The pioneer of co-branded reward credit cards has launched a new credit card for small businesses nationwide, and a new personal credit card for GM employees retirees, GM Dealers, qualified suppliers and their relatives. General Motors announced Thursday it has teamed with Chase to offer the business card and has expanded its relationship with Household to develop the new personal card for GM family members. However, both of the new cards feature a pared-down rewards structure compared to rewards offered on the “GM MasterCard” that was first issued in September 1992. Both of the new cards offer a 1% rebate on all card purchases compared to the 5% rebate offered on the current “GM MasterCard.” The new “GM Business MasterCard from Chase” also offers an additional 1% for GM parts and service purchases at authorized GM vehicle dealers. While there are earnings limits on the current “GM MasterCard,” the new cards have no annual limits on earnings, or limits on the amount of earnings that can be redeemed toward the purchase of eligible GM vehicles. Earnings are valid for up to five years. With the new “GM Business Card from Chase” all earnings from employee accounts roll-up to the business owner’s account, for personal or business redemption. GM and Chase are also offering a special promotion on balance transfers. Meanwhile, the new “GM Extended Family MasterCard” from Household permits members of the “GM Family” to combine their MasterCard earnings with the “New Vehicle Purchase Program” discounts and use them toward the purchase or lease of a new GM vehicle. In addition, cardholders will have a cash back option on earnings accumulated on purchases made with the new “GM Extended Family MasterCard.” The “GM Extended Family MasterCard” will be available in July to current GM family members and to new consumers in September.

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Target 1Q/03

Target Corporation reported yesterday that it experienced its first contraction in bank credit card receivables in the three month period ending May 3rd. The signs of maturation were also evident in Target’s delinquency and charge-off figures for the first quarter. As of May 3rd, Target had $3,751,000,000 in “Target smart VISA” receivables compared to $3,774,000,000 three months ago. Target’s net charge-off rate for its VISA program was 8.5%, compared to 7.3% in the fourth quarter, and 6.9% in the third quarter. Net write-offs for its store credit card program were 8.2%, compared to 8.4% for 4Q/02, and 7.9% in 3Q/02. The 90-day+ delinquency rate for “smart VISA” was 3.3% compared to 3.1% for the prior quarter, and for its “Guest Card” program the figure was unchanged at 5.1%. Target’s profits from its credit card operations was $151 million, slightly above the $150 million profit recorded in the fourth quarter, but well above 1Q/02 profits of $115 million. Totally, Target earned $349 million in 1Q/03. Target also noted yesterday that it was happy with the recent proposed VISA/MasterCard debit card settlement as approximately 25% of its in-store sales are on debit cards. Target says about 50% of its debit card transactions are non-PIN transactions. For complete details on Target’s 1Q/03 performance visit CardData ([www.carddata.com][1]).

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

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