CITI INTL 4Q/07

Citigroup reported that fourth quarter net income for its international card business rose nearly 5% sequentially to a record $678 million. Revenues of $2.62 billion jumped 59% year-on-year, but declined more than $200 million since the third quarter. Revenue growth was primarily driven by higher purchase sales and average loans, up 37% and 53%, respectively, and a $448 million pre-tax gain on Visa Inc. shares.
Credit costs increased 9%, as a decline in net credit losses was offset by an increase in loan loss reserves. Net credit losses declined as higher losses in Mexico and portfolio growth were offset by the impact of recent acquisitions. A charge of $149 million pre-tax to increase loan loss reserves primarily reflected portfolio growth. Credit card outstandings as of December 31st were $46.5 billion, up 50% year-on-year. The account base grew 21% year-on-year to 37.3 million compared to one-year ago. Purchase volume for the fourth quarter was $31.6 billion, a 37% increase year-on-year. Delinquency (90+ days) increased slightly to 2.24% from 2.22% in 3Q/07. Charge-offs were 3.39% compared to 5.62% in the prior quarter and 5.39% for the year ago quarter. For complete detail’s on Citigroup’s international cards performance, visit CardData (www.carddata.com).

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CHEMMART CARD

Chemmart pharmacy group has deployed Visible Results’ loyalty reward
solution to find overwhelming customer response. Available in 160
Chemmart pharmacies throughout Australia, the new solution allows
members to earn reward points on every non-prescription purchase equal
to 5% of the value of the sale and, within the first month of the product
introduction, the organization acquired over 30,000 members. Furthermore,
given its reasonable price tag, a merchant need increase annual sales by 2%
for the system to pay for itself. Visible Results develops loyalty programs
for merchants and retailers across Australia, New Zealand, the US, the UK,
Asia and the Middle East.

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Card Issuers Face a Year of Adversity

New research indicates that bankers are worried about unseen threats that may not yet have surfaced in their credit portfolios and how they can compete rationally during the volatile days ahead. MA-based TowerGroup says that despite the concerns banks will continue their efforts around the reengineering of payments processing – offering new product and pricing packages to targeted customers, and developing a more flexible payments IT environment. Also, as electronic payments volume continues to increase and banks introduce new delivery channels, they will no longer be able to afford operational silos for each type of payment. This pressure will help drive a continued focus on streamlining payments processing. Additionally, heightened consumer awareness of Internet fraud and identity theft will motivate banks to develop new offerings that combine conventional products with identity theft and fraud protection services.

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4Q/07 Charge-Offs Rise Across the Board

The credit card industry is bracing for more bad news as BofA is set to release its fourth quarter report next week. So far, Chase, Citi and AmEx have reported sharply higher charge-offs for the fourth quarter while Cap One also showed a significant uptick in its November charge-offs. Cap One reported that charge-offs hit 5.74% in November, compared to 5.11% in the prior month and 3.79% one-year ago. Cap One will release its fourth quarter report next week. Citi’s charge-offs for bankcard and private label cards rose to 5.11% for 4Q/07, compared to 4.53% in the prior quarter and 4.35% one-year ago. Bankcard charge-offs for Citi rose to 4.65% in 4Q/07 from 4.15% in the prior quarter and 4.05% one-year ago. Chase posted a managed net charge-off rate for the fourth quarter of 3.89%, up from 3.45% in the prior year and 3.64% in the prior quarter. American Express had a charge-off rate for 4Q/07 of 4.3% compared to 3.7% in the prior quarter and 3.5% for 4Q/06.

BANK CREDIT CARD CHARGE-OFFS
4Q/06 1Q/07 2Q/07 3Q/07 4Q/07
Chase 3.45% 3.57% 3.62% 3.64% 3.89%
Citi 4.05% 4.27% 4.25% 4.15% 4.65%
AmEx 3.50% 3.70% 3.70% 3.70% 4.30%
Source: CardData (www.carddata.com)

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Cash Systems Loses a Board Member

Ingenico has hired Lisa Shipley, previously with Hypercom North America, as SVP for Sales and Marketing at Ingenico North America. Shipley will focus on growing Ingenico North America’s banking channel and multi-lane retail business to maximize on opportunities in both the USA and Canada. Prior to serving as SVP of National Sales at Hypercom, Shipley spent 10 years with NationsBank, in both card issuing and merchant acquiring groups. As President of Terminal Management Services, Inc. (TMS), a wholly owned subsidiary of NationsBank, she was responsible for all facets of terminal management sales, support, leasing, and product deployment.

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FreeQuickWire Processing Solution Launched

Las Vegas-based prepaid specialist 3PEA International has acquired control of Wow Technologies. As a result of the acquisition, 3PEA has integrated a PCI DSS certified Prepaid Stored-Value MasterCard/ATM Card Issuer Processing Platform into its payment solutions. Additionally, 3PEA has acquired proprietary intellectual properties and internally developed technology capable of supporting 3PEA’s growth in the prepaid card market. With this, 3PEA has also acquired a number of patents and patents pending all pertaining to the prepaid industry in the US and other countries.

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MasterCard’s Dunbar to Leave Technology Unit

MasterCard confirmed that the President of its Global Technology and Operations unit will be leaving and Rob Reeg, Chief Technology Officer, will head the unit on an interim basis. Roy Dunbar who headed Global Technology and Operations since 2004 will conclude active employment on January 31st with his resignation effective March 15th. He is leaving to become CEO of a company outside the payments industry. Dunbar succeeded Jerry McElhatton in September 2004. Dunbar worked for 14 years at Eli Lilly prior to joining MasterCard. The Global Technology and Operations headquarters of MasterCard is near St. Louis. (CF Library 9/23/04)

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Commerce Bank Names a Payment Systems Exec

Payment process Moneris has entered into an affinity partnership with the American International Automobile Dealers Association to offer dealer members exclusive pricing for merchant card processing, check guarantee, conversion, gift cards and ACH/EFT processing. By partnering with Moneris, AIADA dealers will have access to a simple, exclusive pricing structure, a wide array of hardware and software solutions for payment processing, and unparalleled 24/7 customer and technical support to meet their unique needs. As an added bonus, Moneris’ loyalty program will reward dealerships’ best customers and help retain crucial service business.

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Post-Holiday Credit Card Debt is Unchanged

A new survey has found that when asked how much credit card debt they have this January as compared to last year at this time, 44% of consumers report the same and 29% report less, compared to one-year ago of 43% and 29%, respectively. The TransUnion survey conducted by GfK Roper Public Affairs & Media also found that 42% of consumers report purchasing less through the use of credit this holiday season than last year, a marked increase from the 35% reported in the 2007 vs. 2006 survey. About 30% say they purchased the same amount using credit as in the previous year, down from 37% in 2007. Only 11% indicated they purchased more, as compared with 14% the year prior.

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ADS & Epsilon Ink the Sharper Image Card

Alliance Data Systems will launch an integrated private label credit card program and permission-based email marketing services with retailer Sharper Image. Alliance Data’s bank subsidiary will provide Sharper Image with a full suite of services, including account acquisition and activation, receivables funding, credit authorization, card issuance, statement generation, electronic bill presentment services, remittance processing, marketing and customer service functions. The program will also include loyalty and reward incentives for eligible cardholders, such as merchandise discounts and rebate certificates based on purchases, invitations to in-store events, and other exclusive offers.ADS’ Epsilon will deploy its proprietary email communications and campaign management platform for Sharper Image. Epsilon will also provide strategic consulting to help Sharper Image develop highly targeted permission-based email marketing campaigns designed to acquire, retain customers and generate increased sales through up-sell and cross-sell opportunities. Sharper Image is a specialty retailer with 2006 fiscal year-end revenues exceeding $525 million.

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Recession Can Flatline ARM Industry Profits

About $1.65 billion from 48 completed M&A transactions took place in the accounts receivable management industry last year. Kaulkin Ginsberg says the year was characterized by fewer transactions involving comparatively larger deal values. Significant deals include Sherman Financial, West Corporation, AllianceOne and NCO Group. Kaulkin Ginsberg says that during a recession, major credit issuers like credit card lenders typically increase the volume of placement outsourcing to collection agencies and debt buyers, but it becomes harder for the debt purchasing companies and collection agencies to liquidate the debts. This can potentially flatline or reduce the level of collections and profitability of ARM firms in the short term.

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