Changing  Landscape  Part  3

Despite recent acquisitions Citibank will not top American Express in charge volume this year. There remains a $16 billion gap between the two players. However Citibank maintains a stunning spread between itself and other top ten issuers.

THE  EMERGING  TOP  TEN (based on YTD 97 volume)

1. American Express (all products*)                     $150.5 billion
2. Citibank (inc Travelers, AT&T Universal)             $134.0 billion
3. Bank One (inc First USA, First Chicago)               $88.9 billion
4. MBNA America                                          $63.4 billion
5. Discover                                              $57.9 billion
6. NationsBank (inc Bank of America)                     $45.0 billion
7. Chase Manhattan(inc Bank of NY)              $39.8 billion
8. Household (inc Beneficial)                            $34.9 billion
9. US Bancorp                                            $26.7 billion
10. Capital One                                          $19.7 billion
   TOTAL                      $660.8 billion

* American Express Optima only volume for 1997 was $20.4 billion
   Source CardWeb

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No  Slack  Quarter

MBNA continues to defy gravity as the nation’s third largest card issuer adds more than two million customers during the first quarter. According to MBNA’s first quarter earnings report the company held $50.2 billion in managed loans and generated net income of $149.4 million for the first three months of 1998. Managed loans includes both credit card loans and consumer installment loans. MBNA says it signed up 110 new affinity programs and added 1.7 million new accounts during the first quarter.

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Cap One & Forbes 500

For the second consecutive year, Forbes magazine recognized Capital One Financial Corporation on its “Forbes 500” lists. In its April 20, 1998 issue, the magazine named Capital One to three lists in the latest edition: the “Forbes Assets 500” list, at number 305; the “Forbes Profits 500” list, at number 400; and the “Forbes Market Value 500” list at 372.

“Capital One has had an exciting year of growth with our product innovations and successful expansions into the UK and Canada,” said Richard D. Fairbank, Capital One’s Chairman and Chief Executive Officer. “All of us at Capital One are delighted with our second consecutive year of inclusion in the Forbes 500.”

Nigel Morris, President and Chief Operating Officer of Capital One added, “This listing is truly a testament to the hard work of our 6,000 associates worldwide who are integral to our success and growth.”

Capital One has locations and associates in Richmond, Fredericksburg and Falls Church, Virginia; Tampa, Florida; Dallas/Fort Worth, Texas; and London and Nottingham, England. The company recently announced plans to hire an additional 2,000 associates in 1998.

Headquartered in Falls Church, Virginia, Capital One Financial Corporation is a financial services company whose principal subsidiaries, Capital One Bank and Capital One, F.S.B., offer consumer lending products. Capital One’s subsidiaries collectively had 11.7 million customers and $14.2 billion in managed loans outstanding at December 31, 1997, and are among the largest providers of MasterCard and Visa credit cards in the world.

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Personalizing Smart Cards

John H. Stearns, CEO of fast-growing software startup UbiQ Inc., will delve into a critical industry topic at the CardTech/SecurTech conference on Monday, April 27 in Washington, D.C. His presentation, entitled “Smart Card Personalization in the World of Multi-Application Cards and Interoperability,” is part of the conference’s Smart Card Foundations Workshop from 11:00 a.m. to 5:00 p.m.

Stearns is a smart card industry veteran and has served on international standards committees. Before co-founding UbiQ, he was EVP of operations at DataCard Corporation for eight years, where he was the primary architect of the company’s worldwide new product and business development activities. The text of Stearns’ talk will be posted on UbiQ’s web site after his presentation.

CardTech/SecurTech () is the world’s leading card and security technology conference and exposition, with more than 8500 professionals from 70 nations attending. It is being held at the Washington DC Convention Center.

UbiQ Inc. () is a privately held software firm that has developed proprietary, patent-pending technology for high-volume smart card personalization. It was founded in 1994 and is based in suburban Minneapolis, Minn. (The company’s name is short for “ubiquitous,” a reference to the rapid proliferation of smart cards worldwide.) UbiQ’s mission is to be the highest value integrator in the smart card issuance process, reducing the time and cost necessary for secure, faultless “mass” card issuance. The company’s worldwide customers include smart card issuers such as American Express and member institutions of the Visa, Mastercard, and Mondex networks. It has relationships with card service bureaus, smart card manufacturers, and card personalization and printing equipment manufacturers. Markets or applications targeted by UbiQ include electronic commerce, Internet, travel and entertainment, stored-value cards, pay phone, digital wireless and GSM, national ID cards, and healthcare.

UbiQ’s web site features extensive information about smart cards, personalization, and interoperability, and has links to many other smart card sites worldwide. UbiQ is a registered trademark of UbiQ Inc. and UbiQlink, UbiQware, UbiQard, and UbiQlite are trademarks.

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MC  Electronic  Procurement

MasterCard International, Inc. has begun enterprise deployment of ELEKOM Procurement from ELEKOM Corporation.  The software, currently in use by more than 250 employees, is being rolled out to 2300 end users across MasterCard’s entire enterprise, making it one of the largest implementations of a commercial Electronic Procurement system to date. Thousands of transactions have been successfully completed between MasterCard and its suppliers over the past eight months using ELEKOM Procurement.  The system allows employees to select goods and services form a local catalog containing more than ten thousand items, electronically place orders with suppliers, and pay for products using the MasterCard Corporate Purchasing Card.

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Associates’ Hot Quarter

Associates First Capital Corporation today announced that net earnings for the first quarter of 1998 reached $281.0 million, or $0.81 per share (diluted), an 18% increase over the same period a year ago. This was the 93rd consecutive quarter of improved earnings and the company’s best quarter ever.

Also in the quarter, The Associates announced acquisitions that totaled $3 billion in assets, principally in its rapidly growing international operations.

“We continue to build a balanced base of assets around the world that will provide continued earnings growth,” said Keith W. Hughes, chairman and chief executive officer. “The ability to grow profitably, both internally and through acquisitions, is a core strength of our company.”

At March 31, 1998, total managed assets reached $63.6 billion, 23% higher than the same period a year ago.

“Our first quarter performance was marked by quality growth combined with stable profitability,” Mr. Hughes said. “The strength and continued expansion of our operations outside the United States led the way, particularly in Japan where we announced a major acquisition.”

During the first quarter, the company announced an agreement to acquire DIC Finance in Japan, bringing its total Japanese presence to over 3,000 employees, more than 600 locations and approximately $4 billion in net finance receivables.

“Japan is the largest of our international operations and is likely to be an important source of growth for us in the foreseeable future,” Mr. Hughes stated.

In the first quarter, the company completed the acquisitions of Beneficial Corporation’s Canadian consumer loan subsidiary, with 105 offices and approximately $800 million in net receivables, and CEF Limited, a major construction equipment finance company in the United Kingdom with more than 6,300 contracts and approximately $160 million in receivables.

As a result of these acquisitions, The Associates became the largest foreign-owned finance company in Canada. The corporation also reinforced its position as the largest foreign-owned finance company in Japan, and continued its profitable growth in the United Kingdom.

“We will continue to pursue acquisitions as they add value for our future,” added Mr. Hughes. “The three international acquisitions we announced during the quarter met that test.”

The company’s other operating units also made important contributions to the quarter’s growth.

— Consumer operations, the company’s 1,500-office consumer finance network in the U.S., had good results highlighted by the opening of the Texas home equity market where the company made more than 6,500 real-estate secured loans.

— Commercial operations, a leading source of specialized business financial services, showed receivables growth of over $1.1 billion during the quarter, led by significant expansion of its financing to the manufactured housing industry.

— Credit card operations, a major issuer of bank and private-label cards, booked 240,000 new bank card customers during the quarter and became the first bank card issuer to offer Visa’s premier product, the Signature Card.

Associates First Capital Corporation is a leading diversified finance company providing consumer and commercial finance, leasing and related services through 2,404 offices in the U.S. and worldwide. Headquartered in Dallas, it is one of the nation’s 100 largest companies, based on total market capitalization.

THE ASSOCIATES Financial Highlights ($ millions – except earnings per share)

Three Months Ended or at
3/31/98 3/31/97 %Change
Net earnings
Amount $ 281.0 $ 237.8 18
Return on average equity 17.61 % 17.36 %
Return on average adjusted
equity 20.17 20.95
Return on average assets 1.91 1.94
Return on average managed assets 1.82 1.85
Net earnings per diluted share $ 0.81 $ 0.68 18
Stockholders’ equity $ 6,503.4 $ 5,558.7 17
Net finance receivables
Consumer finance $38,952.2 $32,400.8 20
Commercial finance 18,679.1 15,300.3 22
Total net finance
receivables $57,631.3 $47,701.1 21
Managed receivables $61,048.8 $50,299.3 21
Total assets $60,568.0 $49,210.8 23
Total managed assets $63,564.0 $51,809.0 23
Total revenue $ 2,231.1 $ 1,926.7 16
Net interest margin
(as a % of ANR) 9.15 % 9.46 %
Efficiency ratio 43.3 42.4

Three Months Ended or at
3/31/98 3/31/97
Credit Quality:
60+days contractual delinquency 2.26 % 2.25 %
Credit losses (as a % of ANR) 2.38 2.31
Allowance for losses on finance
receivables
Amount $ 2,014.9 $ 1,675.9
Percent of net finance
receivables 3.50 % 3.51 %

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HouseMiles

North American Mortgage Company(R), one of the nation’s largest residential lenders, has formed an exclusive alliance with Delta Air Lines’ SkyMiles(R) program to reward frequent flyer miles to those borrowers who purchase or refinance a home, according to Fred Koons, chairman and chief executive officer of the nationwide mortgage banker. The program is available nationally.

Called HouseMiles(R), North American Mortgage Company will award 1,000 Delta frequent flyer miles for every $10,000 borrowed. Thus, a $250,000 first mortgage would result in 25,000 Delta miles — enough for a round-trip ticket anywhere Delta flies in the continental U.S. (including Alaska) and Canada. There is no limit to the total miles that can be accrued, and all miles are awarded up front, approximately six to eight weeks after the mortgage loan closes, allowing for travel privileges to begin almost immediately. Moreover, the miles awarded through HouseMiles(R) can be combined with other miles earned through Delta’s comprehensive SkyMiles(R) program. There is no fee to join the program.

“By awarding the miles up front, home buyers receive nearly instant gratification. The lump sum reward will allow some people to take a relaxing trip right when they need it most: just after purchasing a new home and moving all their belongings,” said Koons.

In addition to the frequent flyer miles awarded with mortgages, North American Mortgage Company will also award a flat 2,500 miles to those who take out an equity line of credit — regardless of the loan amount. “The use of equity lines, for consolidation of bills, home remodeling projects and educational expenses, continues to grow,” explained Koons, “and we wanted to reward these customers as well.”

“We believe HouseMiles to be a substantial enhancement to existing mileage programs, as well as an additional incentive to choose the loan products of North American Mortgage Company,” said Pete Bonnikson, executive vice president in charge of Residential Loan Production for the mortgage banker. “We are very pleased to be working with Delta Air Lines on this initiative. Delta carries more passengers worldwide than any other airline — more than 100 million people boarded Delta planes last year,” he added.

The Delta SkyMiles earned through a mortgage or equity loan are offered exclusively through the nationwide network of 170 retail branches of North American Mortgage, or its loan-by-phone center. For more information, borrowers can contact any North American Mortgage Company branch, or the loan-by-phone center at 1-800/759-0306.

The SkyMiles awarded with a mortgage or equity line can be added to the other miles awarded for air travel, or through Delta’s other affinity partners which include Charles Schwab, MCI, American Express, and a number of participating hotels, car rental companies and cruise lines.

In 1997, North American Mortgage Company funded $16.05 billion for borrowers to purchase or refinance their homes, ranking it among the nation’s largest residential lenders. The company offers a complete list of conventional, government, jumbo and adjustable mortgage loans. Additionally it offers a pre-approval mortgage card, equity lines of credit, loans for people with blemishes in their credit history, and a full line of insurance products.

North American Mortgage Company, which funds mortgage loans in all 50 states, is a subsidiary of The Dime Savings Bank of New York, FSB. As of Dec. 31, 1997, The Dime Savings Bank of New York had assets of $21.8 billion and deposits of $13.8 billion.

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Cross  Selling  Tool

American management Systems announced Tuesday the release of Strata Enterprise 3.0, a next-generation customer-based software platform that enables financial institutions to increase customer relationship value across product lines, functional areas and distribution channels.  Strata Enterprise is the first product of its kind with an enterprise-wide integration capability, which enables organizations to increase customer loyalty, improve retention and enhance customer profitability.  The complex decision-making supported by Strata includes the advanced ability to handle new types of complex algorithms and decision criteria.  Multiple decision tools, including scorecards, decision trees, and multi-variable matrices, allow for flexible and elaborate decision strategies for distinct segments of the total customer portfolio.  Aided by OLAP (online analytical processing) technology, Strata’s multi-0dimensional data model becomes a flexible tool for both customer and account level reporting.

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Net  1  Contract  With  VISA

NET 1 UEPS has completed its Technology License Agreement with VISA. Visa International has launched VISA ­ COPACT (Chop off-line pre authorized card) which uses microchip and Net 1’s UEPS technology to permit off-line authorization of transactions with one of Russia’s largest commercial banks, Inkombank, in three cities ­ Ulyanovsk, Togliatti and Nizhny Novgorod.  This system allows transactions to be completed off-line without the need for telephone authorization, making it particularly suited for countries with limited telecommunications and banking services.  The card’s simplicity and security virtually eliminates overspending and fraud which are important in countries that have no banking history or experience with payment cards.  VISA research has identified more than 50 countries where it will be appropriate.  Under the terms of its Technology License Agreement, Net 1 received US $1,000 for each VISA member and non-member financial institution that utilizes the Funds Transfer System patent.

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OFE 1.5 Available

A new and updated version of the Open Financial Exchange communications specification featuring a finalized chapter for bill presentment, along with international extensions and revisions designed to improve overall performance, has been published and made available for broad implementation.

Open Financial Exchange 1.5 was developed in concert with the financial services companies, billers and technology solution providers implementing the specification and supporting its continued development.

Open Financial Exchange 1.5 features the first complete version of the bill presentment extension, which will serve as the basis toward convergence of the Open Financial Exchange specification with the Integrion Financial Network’s GOLD specification. As announced on April 7, 1998 by The Banking Industry Technology Secretariat (BITS), a new open framework for the exchange of financial data and instructions that converges the GOLD and Open Financial Exchange specifications is expected to be published in August 1998. The bill presentment extension defines an open platform for billers and financial institutions on which to build and deploy their bill presentment solutions.

The bill presentment extension incorporates revisions suggested by billers and financial institutions to provide greater flexibility when querying for bill summaries, as well as improved handling of multiple message set versions and an expanded data type set. Overall, the bill presentment chapter has been streamlined and made more efficient as compared to 1997’s draft chapter. With the enhancements to the specification, Open Financial Exchange 1.5 also supports online financial services in Europe. The European extensions to the specification, which support online banking and bill pay, include message sets to manage the transfers and scheduling of payments for European financial institutions.

Open Financial Exchange 1.5 is now available to be downloaded from the Open Financial Exchange Web site at . It reflects the continued input of financial services companies, billers and technology solution providers who have been supporting the specification since it was first introduced in February 1997.

About Open Financial Exchange

Open Financial Exchange is a unified specification for the electronic exchange of financial data between financial institutions, businesses and consumers via the Internet. Created by CheckFree, Intuit and Microsoft in early 1997, Open Financial Exchange supports a wide range of financial activities including consumer and small business banking; consumer and small business bill payment, bill presentment and investments, including stocks, bonds and mutual funds. Other financial services, including financial planning and insurance, will be added in the future.

Open Financial Exchange, which supports transactional Web sites, thin clients and personal financial management software, streamlines the process financial institutions need to connect to multiple customer interfaces, processors and systems integrators. By making it more compelling for financial institutions to implement online financial services, Open Financial Exchange will help accelerate the adoption of online financial services by financial institutions and their customers.

The Open Financial Exchange specification is publicly available for implementation by any financial institution or vendor, and is available for review at . Open Financial Exchange is being used by CheckFree, Intuit and Microsoft as the mechanism for supporting financial data exchange in their products and services.

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MBNA Dividends

MBNA Corporation Announces Quarterly Common Stock Dividend

MBNA’s Board of Directors declared a quarterly cash dividend of $.09 per common share, payable July 1, 1998 to stockholders of record as of June 16, 1998.

MBNA Corporation, a bank holding company and parent of MBNA America Bank, N.A., a national bank, has $50.2 billion in managed loans. MBNA, the largest independent credit card lender in the world, also provides retail deposit, consumer loan, and insurance products.

MBNA Corporation Announces Preferred Stock Dividends

MBNA Corporation announced today a quarterly dividend of $.46875 per share on the 7-1/2% Cumulative Preferred Stock, Series A, a quarterly dividend of $.3654 per share on the Adjustable Rate Cumulative Preferred Stock, Series B, and a quarterly dividend of $.515625 on the 8.25% MBNA Capital C Trust Originated Preferred Securities. All preferred stock dividends are payable July 15, 1998 to stockholders of record as of June 30, 1998.

MBNA Corporation, a bank holding company and parent of MBNA America Bank, N.A., a national bank, has $50.2 billion in managed loans. MBNA, the largest independent credit card lender in the world, also provides retail deposit, consumer loan, and insurance products.

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