MBNA 3Q/02

The suspense over MBNA’s third quarter earnings report ended yesterday without much fanfare. Due to the new FFIEC guidance, MBNA took a $167.2 million after-tax charge, pushing down profits. Third quarter net income came in at $398.0 million, a 16.8% decline from 3Q/01. For the first time, MBNA crossed the $100 billion milestone in outstandings, a $2.8 billion increase over the second quarter. During the third quarter MBNA signed up 86 new affinity and co-branded agreements, and renewed more than 250. MBNA added 4.3 million new cardholders and 3.5 million new accounts during the third quarter. Managed charge-offs for the third quarter were 4.84% compared to 5.09% in the second quarter. Delinquency (30+ days) stood at 4.79% for 3Q/02, compared to 4.90% one year ago. Volume was $41.7 billion, a 16% gain over last year. MBNA’s net interest margin has been shrinking this year, hitting 7.66% for the third quarter, despite a re-pricing campaign launched this summer. For complete details on MBNA’s third quarter performance visit CardData ([www.carddata.com][1]).

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

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Bank One Branding

Bank One is officially burying the First USA brand name with a new ad campaign that starts tomorrow. The campaign will start with a series of 30-second television commercials scheduled to begin airing during Game One of the World Series. Bank One will spend $25 million in the fourth quarter alone to nationally advertise the array of credit card options now available from Bank One. The ads, which feature actual customers rather than actors, highlight the wide range of reward and affinity cards available through partnerships with 1,200 corporate brands, institutions and non-profit organizations. New York advertising agency The Gardner-Nelson Project developed the campaign.

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SchlumbergerSema 3Q/02

SchlumbergerSema reported that operating revenue of $896 million in the third quarter increased 6% year-on-year and 5% sequentially despite the weak IT spending environment. Pretax operating income of $20 million, before charges, declined 8% year-on-year but doubled sequentially due to continuous cost-containment efforts and improved margins in the UK GeoMarket. However, prices continued to weaken. To adapt to the slower growth environment, the cost reduction program continued during the quarter resulting in a pretax operating charge of $16 million ($12 million after tax) for employee severance costs. Volume products revenue of $210 million experienced strong year-on-year and sequential growth of 10% and 5% respectively. This improvement reflected an all-time record volume of mobilecom cards, higher demand in the banking card segment, and sustained activity in banking and parking terminals. Pretax operating income of $9 million improved 42% sequentially, mainly attributable to better productivity in smart cards and terminals. For complete details on SchlumbergerSema’s third quarter performance visit CardData ([www.carddata.com][1]).

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

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RBA FEE FIGHT

VISA and MasterCard argued in The Federal Court of Australia last week
that it may take up to six weeks to present their case against the Reserve
Bank of Australia over new credit card laws pertaining to merchant fees.
The Court has set a trial date of May 5th but will hold related hearings on
November 18 and April 18. The card associations argue that the Reserve Bank
of Australia hasn’t complied with its obligations under the Payment Systems
Act, and that the proposed changes don’t meet the public-interest test
required under the act. In August, the Reserve Bank of Australia released
its final reforms on credit card programs which include dropping average
interchange fees by 40% and lifting the restriction imposed by credit card
programs which prevent merchants from recovering from cardholders the costs
of accepting credit cards. Under the new RBA rules, interchange fees will
decrease from around 95 basis points to approximately 55-60 basis points by
July 1, 2003. The Reserve Bank’s standard on merchant pricing will come
into force on January 1, 2003. The RBA also announced an end to
restrictions imposed by credit card networks which limit the entry of new
competitors. Specialist credit card institutions authorized and supervised
by the Australian Prudential Regulation Authority will now be eligible to
apply to participate in credit card programs. All the reform measures will
apply to the credit card networks operated in Australia by Bankcard,
MasterCard and VISA, which were formally designated by the Reserve Bank as
payment systems subject to its regulation under the Payment Systems
(Regulation) Act 1998. American Express and Diners Club have each indicated
to the Reserve Bank that they will remove their restrictions on merchant
pricing.

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Chase 3Q/02

Chase has surpassed the $50 billion mark in outstandings as nearly 900,000 new accounts were added during the third quarter. Since 3Q/01 the Chase card portfolio has grown 31% primarily due to its acquisition of Providian receivables. On a managed basis, the credit card net charge-off ratio was 5.51%, compared to 6.42% for the second quarter and 5.64% for the third quarter of 2001. The improvement from the second quarter reflects lower bankruptcies and higher balances. During the quarter, Chase boosted loss reserves by $189 million to comply with new FFIEC draft guidelines. Chase ended the quarter with $51.1 billion in outstandings compared with $49.5 billion in the previous quarter, and $38.9 billion in the year ago quarter. Third quarter volume was $23.0 billion, a 28% gain over 3Q/01. Total accounts now stand at 28.6 million compared to 23.4 million on year ago. During the third quarter, Chase signed up 900,000 new accounts but closed 400,000 accounts. For complete details on Chase’s third quarter performance visit CardData ([www.carddata.com][1]).

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

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USTT & ZiLOG

USA Technologies and ZiLOG have combined resources to co-market and co-develop a joint product that will integrate the “e-Port” wireless transaction processing and monitoring capabilities with ZiLOG’s Internet ready “eZ80” microprocessor. Both companies are also developing reference designs and development kits that will be available for manufacturers to easily incorporate network ready devices into their own appliances. These appliances will be able to utilize various networks, including USA Technologies’ network, for transaction processing and monitoring of these appliances.

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Household 3Q/02

Household reported U.S. bank card receivables of $15,828,360,000 for the third quarter, up 4.9% from one year. U.S. VISA/MasterCard volume for 3Q/02 was $9.3 billion, compared to $9.0 billion in the previous quarter, and $8.6 billion one year ago. Active accounts stood at 10,943,000 compared to 10,224,000 for 2Q/02. Managed private label outstandings rose 12.7% to $13,643,000,000. VISA and MasterCard charge-offs for the third quarter were 6.81%, compared to 7.54% in 2Q/02, and 6.75% one year ago. Private label losses were 6.12% compared to 5.13% for 3Q/01. Delinquency (60+ days) came in at 4.14% at the end of thrid quarter versus 3.90% in the previous quarter. For complete details on Household’s third quarter performance visit CardData ([www.carddata.com][1]).

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

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EGG SECURITIZATION

Egg Banking PLC is placing its VISA card receivables and, potentially,
MasterCard receivables on accounts its owns as collateral for new
securitization. Standard & Poor’s Ratings Services said that it assigned
its preliminary credit ratings to the sterling- and euro-denominated
asset-backed floating-rate notes to be issued by Pillar Funding Series
2002-1 Plc. Egg was launched in 1996 as a banking subsidiary of Prudential
PLC, the U.K.-based financial services group. Egg is primarily focused on
providing Internet-based financial services to its customers. Egg offers
deposit accounts, credit cards, personal loans, and mortgages via the
Internet and by telephone.

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