Ten Year High

Credit card profits for 2001 hit their highest level in more than ten years due to the dramatic drop in cost-of-funds and rising fee income. The average pre-tax, return-on-assets for credit card portfolios last year is projected to reach 4.0% compared to 3.6% for 2000. CA-based R.K. Hammer Investment Bankers reported that chargeoffs will also hit a ten year high during 2001 but the effect is offset by the reduced funding costs and higher fees.

U.S. Bank Credit Card Profitability Historical
(VISA, MasterCard, and Discover)
1989 21.3% 5.5% 3.8% 7.9% 4.1%
1990 20.9% 5.1% 4.3% 7.8% 3.7%
1991 20.5% 4.8% 4.7% 7.6% 3.4%
1992 19.4% 4.9% 4.9% 6.5% 3.1%
1993 18.6% 4.7% 4.6% 6.0% 3.3%
1994 18.5% 4.5% 4.4% 5.7% 3.9%
1995 18.0% 4.2% 4.1% 6.1% 3.6%
1996 17.9% 4.3% 4.2% 6.1% 3.3%
1997 17.4% 4.3% 4.6% 5.9% 2.6%
1998 17.3% 4.4% 4.7% 5.7% 2.5%
1999 17.9% 4.5% 4.4% 5.9% 3.1%
2000 18.4% 4.5% 4.3% 6.0% 3.6%
2001 18.8% 4.7% 5.1% 5.0% 4.0%
INC-total income; OX-operating expense; CO-charge-offs;
COF-cost-of-funds; ROA-net pre-tax return-on-assets
Source: R.K. Hammer Investment Bankers



With the 2001 Christmas shopping season coming
to a close, Moneris Solutions, Canada’s largest processor of credit and debit
card transactions, reports that December 21, the last Friday before Christmas,
was the busiest shopping day of the year so far. In total, Moneris processed
more than 7.2 million Visa, MasterCard and INTERAC Direct Payment transactions
that day. The number of sales transactions processed on Friday was 3% higher
than the number processed on Saturday December 22 – the day most often
predicted to be the busiest shopping day of the year. During Friday’s peak,
Moneris processed over 470 transactions per second!

The number of sales processed on Friday also represented a 6.6% increase
over the number processed during last year’s busiest day. This is further
evidence of the rapid expansion of the Canadian electronic transaction-
processing sector — which is currently a $220 billion market.

“Moneris Solutions is the first company to enable Canadian businesses to
process all their credit and debit card sales through one supplier – we met
the challenge of processing well over 7 million transactions securely and
flawlessly, and that was well appreciated by retailers and customers across
the country,” said Jim Baumgartner, President and CEO, Moneris Solutions Corp.
“Moneris streamlined the holiday frenzy for retailers, kept the customer line
moving and helped to reduce holiday stress.”

In the past, retailers had to handle Visa and MasterCard processing
through separate financial institutions. Now thanks to Moneris, a Canadian
company, headquartered in Toronto, ON, retailers can have a convenient one-
stop integrated solution to handle Visa, MasterCard and INTERAC Direct
Payment. The same system can handle loyalty programs, electronic gift cards
and wireless payment processing, as well as deliver enhanced on-line reporting

About Moneris Solutions Corp.:

Moneris Solutions is Canada’s leading technology and merchant processing
company. Moneris was formed in December 2000 as a result of a 50:50 joint
investment between the RBC Financial Group and Bank of Montreal. Moneris
provides businesses with technologically advanced, easy to use, point-of-sale
solutions designed to electronically process and authorize credit and debit
card transactions, including customized loyalty card transactions. Moneris’
leading-edge technology allows merchants to streamline payment processing and
improve business efficiency. In less than a year, Moneris has become Canada’s
largest and one of North America’s largest merchant payment processing
companies. Moneris serves more than 300,000 North American customers and has a
staff of 900 employees. With head offices in Toronto, Ontario, the company
also has offices in Chicago, Illinois and Montreal, Quebec. For more
information, please visit www.moneris.com.



Gemplus said this week that it will take a 4Q charge of 25 million Euro to
cover the cost of replacing its chairman and CEO. Last week, the smart card
manufacturer announced that Antonio Perez has decided to resign as CEO and
Lassus, founder and chairman, will step down in January. Under terms of deal,
Perez will return 12 million Gemplus shares and will receive $1 million in
severance pay. Gemplus says the cost of the Perez deal will be
approximately 12
million Euros. Lassus will receive a payment of $12 million. Ronald
an existing member of the board of directors, has been named as CEO and
Chairman of the Executive Committee. The board has elected Hasso Von
Falkenhausen to the board and designated him as Chairman commencing on January



MBNA Corporation announced
that the Virgin Group, one of the largest companies in Britain and owners of
one of the largest brand names in the world, Virgin, has signed a long-term
agreement with MBNA Europe Bank to offer the Virgin Card MasterCard in the
United Kingdom.

The Virgin Group, led by Sir Richard Branson, operates Virgin airlines, as
well as passenger trains, an auto internet acquisition company, a travel
service, a mobile phone provider, a beverage distributor, and Virgin Money,
which will be responsible for the credit card. The company specializes in
identifying market areas where it believes the consumer is being under served
and in establishing alternative products and services aimed at addressing
these markets.

The Virgin Card will offer a rewards program that brings together many of
the products and services offered by companies within the Virgin Group.
Details of the card offer and the rewards program will be announced when
marketing of the Virgin Card begins early next year.

“MBNA is very excited about working with Virgin and bringing the Virgin
Card to Customers in the United Kingdom,” said General Charles Krulak,
Chairman and CEO of MBNA Europe. “Our commitment to providing the highest
level of Customer service is a perfect match with Virgin’s reputation for
providing the best service to their consumers.”

Commenting on the partnership with MBNA, Paul Pester, CEO of Virgin Money
said, “We chose MBNA because they are the largest independent credit card
lender in the world and their knowledge and experience is invaluable. They
focus on providing innovative products backed by excellent Customer service.
In this regard, our two companies are very similar.”

MBNA’s international operations located in the United Kingdom, Ireland,
and Canada serve more than 7 million Customers who carry $10.8 billion in
managed loans, a $1.9 billion increase over year-end 2000. MBNA Europe, which
began marketing in the United Kingdom in 1993, has operations in Chester and
London, England and Carrick-on-Shannon and Dublin, Ireland. MBNA Europe is
the third largest credit card lender in the United Kingdom with a 13% market
share of industry balances. MBNA Europe added 1.3 million new accounts in the
first 11 months of 2001.

MBNA Europe has endorsements from more than 800 organizations and
financial institutions. In addition to the Virgin Group, other endorsements
include, for example, all the colleges of Oxford University, the World Wide
Fund for Nature, the Royal College of Surgeons, the Royal Corps of Engineers,
the Irish Nurses Organisation, and the Institute of Chartered Accountants in
England and Wales. MBNA also has the endorsement of half of the 20 teams of
the English Premier Football League, including Manchester United FC and
Liverpool FC.

MBNA Corporation (NYSE: KRB), a bank holding company and parent of
MBNA America Bank, N.A. and MBNA Europe Bank, Ltd., has more than $96 billion
in managed loans. The largest independent credit card lender in the world,
MBNA also provides retail deposit, consumer loan and insurance products.



The Auxer Group, Inc. (www.axgiinvestor.com)
announced that its subsidiary, CT
Industries, Inc., formerly introduced its line of prepaid calling cards under
the new Platinum Series.
The line has been introduced with four products: African Talk,
Kamustahan, One Cent America and El Sol Mexicano. The Platinum
Series currently focuses on Asia, Mexico, Africa and the domestic markets. The
line is expected to expand to six products in January. The Company has been
working on forming its network of tier one carriers, as well as strengthening
its customer service team and its customer base during the year 2001.


The Auxer Group is a holding company that consists of two groups; a
Telecommunications Group and an Automotive Group. The Telecommunications Group
is focused on distribution of prepaid products, which includes The
and One Cent America(TM). The Automotive Group is focused on aftermarket
wholesale and distribution of automotive and marine products and parts, which
includes Easy Test(R) and Garry’s Royal Satin(TM).



In order to adapt its
structures to
a rapidly evolving commercial environment, Gemplus International SA announced
the following changes to its senior management and Board of Directors.

– Following the announcement that Antonio Perez has decided to resign his
as Chief Executive Officer and director to pursue other interests, Mr. Ronald
Mackintosh, an existing member of the board of directors, has been named as
Chief Executive Officer and Chairman of the Executive Committee, effective
immediately. In order to focus on his new responsibilities, Mr. Mackintosh has
resigned from his position on the board of directors.

– Dr. Marc Lassus, founder and one of the largest shareholders of Gemplus, has
agreed with the approval of the board to cease his office as chairman of the
board effective January 10, 2002. The board, with the agreement of Mr. Lassus,
has elected Dr. Hasso Von Falkenhausen to the board effective immediately and
designated him as Chairman commencing on January 10, 2002. Dr. Von
previously served as Chairman of Gemplus from 1997 to 1999. Dr. Lassus remains
a director of the company.

– David Bonderman, founding partner of the Texas Pacific Group, has joined the
board of directors and has been elected Vice Chairman. Abel Halpern has
resigned as Vice Chairman but remains as a director of Gemplus.

– Mr. Andrew Dechet and Dr. Bertrand Cambou have resigned as directors.

– A committee of the Board of Directors will hire an international search firm
to begin an immediate search for a new, permanent CEO and a new permanent
Chairman for Gemplus.

In a statement, the Board of Directors said:

“The appointments of Dr. von Falkenhausen and Mr. Mackintosh bring new
leadership and strength to the Gemplus management team. Both are
highly-regarded professionals with significant experience in operating
technology companies and growing businesses. Dr. von Falkenhausen, who
represented a significant investor and was a board member of Gemplus through
much of the 1990’s has a strong working knowledge of the company that will be
invaluable in maintaining Gemplus’s leadership in providing smartcard

In a statement, Dr. von Falkenhausen and Mr. Mackintosh said: “We remain
absolutely convinced of the power and potential of Gemplus technology. We
intend to work with the employees of Gemplus to strengthen and expand our
leadership position in our key vertical markets – telecommunications,
services and e-business security. However, as we focus, we must rebuild the
energy and entrepreneurial spirit that has made Gemplus the company it is
today, and we need to rely on our strength in smartcards as we move up the
value chain and develop software and service solutions around our core

Dr. von Falkenhausen returns to Gemplus after retiring in 1999. He is a
managing director of PolyTechnos Venture Partners, a German venture capital
fund he co-founded in 1998. From 1987 through 2000, Dr. von Falkenhausen
and supervised the plastic card related products and services business of
DataCard Corporation, Minneapolis, for the Dr. Herbert Quandt family in Bad
Homburg, Germany. Following an investment in Gemplus in 1993, Dr. von
Falkenhausen became a member of the Directoire of the company and, ultimately,
Chairman of the Board from 1997 until his retirement in 1999. Dr. von
Falkenhausen has held numerous Board positions in German and international

Mr. Mackintosh served from July 2000 as Chief Executive of UK-based
Differentis, an e-business integrator. From 1990-2000, he served in a
number of
executive capacities of Computer Sciences Corporation, most recently as
President and Chief Executive of CSC’s European Group. Throughout his career,
he has held a number of executive positions in companies involved in
information technology.

About Gemplus

GEMPLUS: the world’s number one provider of solutions empowered by Smart

Gemplus helps its clients offer an exceptional range of portable, personalized
solutions that bring security and convenience to people’s lives. These include
mobile Internet access, inter-operable banking facilities, e-commerce, and a
wealth of other applications.
Gemplus is the only completely dedicated, truly global player in the Smart
industry, with the largest R&D team, unrivalled experience, and an outstanding
track record of technological innovation.
Gemplus trades its shares on Euronext (Sicovam 5768) Paris S.A. First Market
and on the Nasdaq (GEMP) Stock Market. Its revenue in 2000 was 1.205 Billion
Euros. It employs 6 800 people in 37 countries throughout the world.
Gemplus: Your Passport to the Digital Age


Vending Card Payments

Pepsi-Cola North America and New York City-based U.S. Wireless Data have launched a pilot to test a system that enables consumers to pay for Pepsi soft drinks with credit cards. The test, launched in Memphis this week, uses wireless technology to allow Pepsi bottlers to receive up-to-the-minute inventory information from the vending machines via a Web browser. Route drivers will know exactly how much product they will need for their daily delivery routes and will no longer carry excess inventory or make unnecessary trips to full machines. USWD developed the new card payment and telemetric technology, called ‘Synapse’. In addition to allowing credit card purchases and providing tracking data, the ‘Synapse’ technology also will enable Pepsi to eventually implement loyalty card, gift card, and smart cards. Last year Pepsi Cola expanded a system designed by Dixie-Narco, Debitek, CANTV, and Gemplus, which allows CANTV telephone customers in Venezuela to use their pre-paid telephone cards to purchase Pepsi Cola products from Pepsi Cola vending machines. The system, which originally piloted in February 1999 with 25 Pepsi Cola vending machines installed, has now expanded to over 500 vending machines throughout Caracas. (CF Library 3/29/00)



MetroCorp Bancshares Inc., a Texas community banking organization serving
primarily the
Asian and Hispanic markets, announced that its wholly owned subsidiary,
MetroBank, N.A., is introducing its new Matricula Checking account as a
to Mexican nationals in the Houston Metropolitan area.

Allen Brown, president of MetroCorp and chief executive officer of MetroBank,
said, “We are delighted to introduce Matricula Checking — a new and
product for the Hispanic community. Since we were first approached by the
Mexican Consulate several months ago, we have been working diligently together
to make this product available. It directly addresses a significant social
issue among local Hispanics. Mexican nationals in our area can now take a
step toward financial freedom — they will have immediate safety and security
of their money, and cost-effective, flexible access to their funds. We are
excited to be the first bank to make this possible in the Houston area.”

MetroBank’s Matricula Checking provides significant benefits by:

— providing a safe, secure place to keep money, with easy access to funds. It
eliminates most reasons for having to personally carry large sums of cash, or
hide it in an unsecured location.

— making basic financial transactions easier and more cost-effective.

— allowing the account holder the opportunity to accumulate a sound credit

— bringing the account holder more directly into the process of this
financial system.

With the account, a holder can:

— write checks and execute transactions cost-effectively,
including wire transfers.

— have ATM access, and they could designate someone in Mexico to
have limited ATM access to their account.

— access the account online, as well as through the bank’s
multi-lingual Telebanking phone line.

In order to open a Matricula Checking account, a person must be a Mexican
national and hold a valid Matricula ID card issued by the Office of the
Consular General of Mexico for the Houston metropolitan area. It is located
near downtown Houston and serves the surrounding 30-county area of southeast
Texas. Applicants should visit MetroBank’s East branch, at 6330 Capital (and
Harrisburg), where a Spanish-speaking representative will assist them. They
must bring their Matricula Consular ID card, money for the initial deposit and
complete address information.

This checking account and service is made possible by the Matricula ID card,
which is issued by the Mexican government for use by its citizens living
abroad. Its most critical feature is the secure and positive identification
that it provides. The Mexican Consulate issues the card under the authority of
the Mexican government.

Don Wang, chairman of MetroCorp, added, “It is our sincere hope that this new
account will offer Mexican nationals in our area a greater opportunity to
participate directly in our financial system. These are things most of us
living here take for granted every day. It’s actually not the product itself,
but what it can provide — safety and security of funds, easy access to money,
and the ability to easily transfer funds.”
MetroCorp Bancshares Inc., with $730 million in assets, provides a full range
of commercial and consumer banking services through its wholly owned
subsidiary, MetroBank, N.A. The company has 14 full-service banking locations
in the greater Houston and Dallas metropolitan areas. For more information,
visit the company’s Web site at


Holiday Spending

As of mid-morning, American consumers have racked up $109 billion in credit card charges since the Thanksgiving holiday according to CardWeb.com’s home page holiday activity tracker. About $70 billion of these charges are holiday-related. According to a survey released yesterday by the American Bankers Association, many consumers are sticking to their holiday budgets this season. The survey shows that 42% of consumers are just about on target with their holiday budgets. Thirteen percent reported being under budget, while 11% reported being over budget. Thirty-two percent made no holiday budget. The ABA survey also shows that 76% of consumers plan to simply save more money and 68% intend to pay down their debt.

**Holiday Credit Card Activity**



QI Systems, Inc. announced that it has been retained by a major San
Francisco-based system
integrator and consulting company to develop and incorporate their SmarTe
Campus Solution into QI’s Unattended Point Of Sale payment terminals
two large college campuses in Northern California, with a total student
body of
approximately 50,000.

In the first phase of the project, QI is installing its UPOS payment terminals
for soda vending machines, copiers and value reload stations. QI anticipates
beginning the second phase of the project during the Spring of 2002, which
include the installation of UPOS payment terminals for snack vending machines,
network printing and pay and display parking. In addition, the system
integrator and consulting firm expects to expand their installation of similar
systems into six additional colleges in California by the end of 2002.
Mesbah Taherzadeh, President and CEO of QI Systems, Inc., stated, “Our new
strategic relationship with this leading consulting company opens the door for
even greater growth in the huge college campus market. We are optimistic in
quickly gaining momentum in this target market and the overall UPOS market,
which has an estimated 35% annual growth rate, because of the advantageous
features of our industry standard-setting products. Our smart card readers can
read different types of cards and also have an unprecedented upgrade
compared with what is commonly available in the market today.”

QI Systems, Inc.
(http://www.qisystems.ca) designs hardware
and software for the rapidly expanding cash card industry. It is a leader in
supplying solutions for smart card vending with products in use in Canada, the
U.S., Venezuela, Hong Kong, the UK, and Norway. QI’s SmartVend technology
enables debit card purchases by consumers from a wide range of vending
types. The SmartVend system is currently being used in conjunction with many
card schemes, including VisaCash, Mondex (Multos), CANTV (Venezuelan phone
card), Telus SmartONE card and others. Due to the modular structure of
SmartVend, multiple card schemes can be run in parallel in the same unit with
new schemes added at a later date. QI’s SmartVend systems have been installed
in Coca-Cola and Pepsi vending machines, coffee, snack and sandwich machines,
laundromat machines, copiers, newspaper vending boxes for such publications as
USAToday and in parking machines.


Delinquency Soars

More confirmation that fourth quarter delinquency is headed higher came from the American Bankers Association’s 3Q/01 ‘Consumer Credit Delinquency Bulletin’. Based on total dollars outstanding, third quarter credit card delinquencies were 4.45%, about 8% higher than the second quarter and more than 13% above the year ago level. Among credit card-backed securities, delinquencies averaged 5.3% in October, with nearly three-quarters of such securities reporting an increase in 30-plus day delinquencies, according to CardData (www.cardata.com). Based on the number of credit card accounts, the ABA found that 3.77% were overdue during the third quarter, a slight decline from the previous quarter, but remaining at the highest level tabulated since 1980. The ABA says the modest decline in the number of past-due accounts during 3Q may be related to the steep decline in gas prices, the income tax rebate, and high levels of mortgage refinancing. However the ABA cautioned that continued layoffs and the economic fallout from 9-11 may significantly impact the fourth quarter performance by consumers. (CF Library 12/13/01)

(based on total dollars outstanding)

2000: 3.93%
1999: 4.25% 1995: 4.21% 1991: 4.54% 1987: 3.72% 1983: 2.75%
1998: 4.63% 1994: 2.90% 1990: 4.01% 1986: 4.90% 1982: 3.92%
1997: 5.31% 1993: 3.83% 1989: 3.45% 1985: 3.15% 1981: 2.37%
1996: 5.03% 1992: 4.27% 1988: 3.40% 1984: 3.30% 1980: 3.40%

Source: American Bankers Association Delinquency Bulletin