Gemplus 2Q/02

Smart card manufacturer Gemplus reported a second quarter operating loss, before restructuring charges, of US$25.1 million, almost half the losses posted in 2Q/01. The company also confirmed that its interim CEO, Ron Mackintosh, has decided to step down as of August 15th, with no apparent successor named till then. 2Q/02 revenue was up 19% to US$217.9 million, and gross profit was up 34% to US$50.3 million compared to 1Q/02. However revenue for 2Q/01 was US$261.9 million and gross profit was US$96.3 million, significantly above current quarter levels. Since February, the company has gone through a restructuring that has reduced its operating costs by US$69.6 million annually. The company is seeking to cut $114.2 million from its costs by year-end, according to The RAM Report ([www.ramreport.com][1]). Gemplus also noted that it decided to include in its consolidated accounts for the second quarter a provision to cover the risk of possible non-reimbursement of a loan granted to Dr Marc Lassus, former Chairman and a current Board member, in the amount of US$69.5 million. For complete details on Gemplus’ 2Q/02 performance visit CardData ([www.carddata.com][2]).

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

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MBNA Europe

MBNA Europe Bank Limited has acquired the $1.2 billion credit card portfolio of Britain’s Alliance & Leicester plc. Under terms of the deal, MBNA will market credit cards to A&L’s 5.5 million customers through A&L’s 310 branches in the UK and also will develop products and services for A&L’s 1.34 million existing cardholders. Inclusive of the A&L portfolio, MBNA has more than a 14% market share of all credit card receivables in the United Kingdom and a 19% share in Ireland. Prior to the acquisition, MBNA had approximately 8.0 million cardholders in the U.K., Ireland, Canada, and Spain, according to The RAM Report ([www.ramreport.com][1]). MBNA will manage the A&L card portfolio from its administrative and operations facilities in Chester, England. The bank also has facilities in London and in Carrick-on-Shannon and Dublin, Ireland. In May, the Bank of Spain approved MBNA’s application for a branch license that will allow MBNA to market credit cards and related products in Spain. MBNA expects to begin operations in Spain during the 3Q/02. In mid-April, MBNA Europe Bank Limited received clearance from the Financial Services Authority in the U.K. to apply to the Bank of Spain for a branch license to operate in Spain. Spain will become the fourth international market that MBNA has entered. (CF Library 4/12/02; 5/14/02)

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

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AmEx Cheque Head

American Express has promoted Valerie Soranno Keating, a nine-year company executive, to the position of President, Global Travelers Cheque Group. American Express Travelers Cheques have provided peace of mind to travelers across the globe for more than 100 years. Just last month the company announced a new service free to all American Express Travelers Cheque customers to help to replace their lost or stolen passports and credit cards anywhere in the world, 24 hours a day, 7 days a week.

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ASDC Settles FTC Charges

American Savings Discount Club and its two principals reached an agreement with the FTC yesterday to establish a redress fund of nearly $3 million after generating nearly $50 million from consumers over a five-year period in an advance-fee loan program. ASDC has agreed to these provisions in order to settle a complaint that the Federal Trade Commission filed jointly with the Attorney General’s Offices of Virginia, Wisconsin, and North Carolina. The complaint alleged that the company pitched a fraudulent advance-fee loan promotion to hundreds of thousands of consumers nationwide.

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Charge-Offs 2Q/02

Charge-offs among the top ten issuers of VISA and MasterCards increased by nearly 22% during the second quarter compared to 2Q/01, driven largely by the rise in sub-prime losses. Providian and Metris/Direct Merchants reported the largest jump in losses, 70% and 38%, respectively. Bank One/First USA and Fleet continued to report decreasing charge-offs over the past twelve months. Discover reported a 26.5% increase in losses for 2Q/02 compared to the second quarter of last year. For 2Q/02, Discover reported a charge-off rate of 6.30%, compared to 6.49% in the previous quarter, and 4.98% one year ago. For American Express, losses slowed from 6.5% in 1Q/02 to 6.2% in the second quarter. During 2Q/01, American Express experienced a charge-off rate of 5.7%. Among the top ten VISA and MasterCard issuers, the average charge-off rate for the second quarter came in at 7.95%, compared to 6.52% one year ago. If Providian and Metris/Direct Merchants are excluded, the average for the top issuers would be 5.87% for 2Q/02 compared to 5.50% for 2Q/01. For complete portfolio details on the top U.S. issuers visit CardData ([www.carddata.com][1]).

TOP TEN VISA/MC ISSUER CHARGE-OFFS
2Q/02 1Q/02 2Q/01 ANN CHNG
1. Citigroup: 6.50% 6.41% 5.51% +17.9%
2. MBNA 5.09% 5.00% 4.82% +5.6%
3. First USA: 5.62% 5.69% 6.09% – 7.7%
4. Chase: 6.42% 5.87% 5.54% +15.9%
5. Cap One: 4.36% 4.00% 3.98% + 9.5%
6. Providian: 17.53% 15.05% 10.29% +70.4%
7. BofA: 5.59% 5.43% 4.94% +13.2%
8. Household: 7.54% 7.17% 6.82% +10.6%
9. Fleet: 5.81% 5.42% 6.31% – 7.9%
10. Dir Merch: 15.00% 13.00% 10.90% +37.6%
AVERAGE: 7.95% 7.30% 6.52% +21.9%
Source: CardData (www.carddata.com)

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

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SCOTIABANK CASH BACK

Starting today, Scotiabank “Classic VISA” credit card customers will receive up to one per cent cash-back on all purchases made with their card. The cash-back feature is being added as a
benefit on all Scotiabank “Classic VISA” cards. The cash back feature is tiered. On the first $1,500 of annual purchase volume, the customer receives 0.25 per cent cash-back; on the second $1,500 of annual purchase volume, the customer receives 0.50 per cent cash-back; and, on all annual purchase volume amounts greater than $3,000, the customer receives one per cent cash-back. The program carries no extra fee. The announcement follows the debut earlier this year of a no annual fee option for the Bank’s “Value VISA” credit card. With an 11.9% interest rate, the no fee “Value VISA” is the only no fee low rate credit card in Canada.

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Zixit Loses Lawsuit

Dallas-based ZixIt, an e-messaging service, lost its lawsuit against VISA after alleging that VISA interfered with prospective business relationships for “ZixCharge,” a payment system for online transactions. ZixIt Corp. is a global provider of secure e-messaging services, providing innovative, cost-effective and easy-to-deploy solutions that ensure the highest levels of security for corporate email and other electronic messages.

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MAESTRO SWITCH

An agreement in principle has been reached between the Switch Card Scheme Board and MasterCard Europe to migrate the Switch debit card brand to Maestro in the UK. Upon completion of the agreement, migration of the brand will begin with immediate effect and will be completed by mid-2007. In the early stages, most cards and shop windows in the UK will carry both the Switch and Maestro logos, and then gradually the Switch brand will be withdrawn. As well as agreeing in principle on the brand migration, the Switch Scheme will also outsource its transaction processing to MasterCard using EPS-Net, the telecommunications and data processing arm for MasterCard and Maestro transactions in Europe. EPS-Net will be responsible for the processing of all inter-member transactions performed domestically in the UK. Switch process 1.3 billion transactions a year and an annual spend of over £45 billion.

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GEMPLUS 2Q/02

Paris-based smart card manufacturer Gemplus reported a second quarter operating loss, before restructuring charges, of US$25.1 million, almost half the losses posted in 2Q/01. The company also confirmed that its interim CEO, Ron Mackintosh, has decided to step down as of August 15th, with no apparent successor named till then. 2Q/02 revenue was up 19% to US$217.9 million, and gross profit was up 34% to US$50.3 million compared to 1Q/02. However, revenue for 2Q/01 was US$261.9 million and gross profit was US$96.3 million, significantly above current quarter levels. Since February, the company has gone through a restructuring that has reduced its operating costs by US$69.6 million annually. The company is seeking to cut $114.2 million from its costs by year-end. Gemplus also noted that it decided to include in its consolidated accounts for the second quarter a provision to cover the risk of possible non-reimbursement of a loan granted to Dr Marc Lassus, former Chairman and a current Board member, in the amount of US$69.5 million.

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