Thursday, October 20, 2011

Durbin Amendment Final Rules: Analyzing Settling Dust

Report Assesses the Durbin Amendment and Considers the Impact Across Stakeholders and the Future of Payments.

Boston, MA -- Now that the Durbin Amendment (Regulation II) has been moved from possibility to reality, we must put this legislation in context of the current dynamics within and around the payments market. Mercator's new report, Durbin Amendment Final Rules: Analyzing Settling Dust, takes a wide market view across its primary stakeholders. By incorporating expert analysis alongside findings from executive interviews and conversations, the report presents a picture of the present and, what could be, the future state of the debit card industry.In the report, Mercator thoughtfully examines major components of the final rules, presents the potential impact each may have on the market, and offers an organizing framework for considering the Amendment's impact on the U.S. debit payments industry moving forward.

"In response to the Durbin Amendment, we believe it is reasonable to assume that the FI market will more rapidly build efficiencies and aggressively compete to gain more financial services activity per consumer," Patricia Hewitt, director of Mercator Advisory Group's Debit Advisory Servicecomments.

Highlights of this report include:


A discussion of market dynamics that lead to the Durbin Amendment being signed into law.

Review of the changes taking place in the non-interest revenue streams supporting retail depository accounts in the United States.

A detailed discussion of the major components of the legislation including:

The potential impact on the small/medium sized financial institution market, and why interchange fee regulation may be a small part of a much larger challenge for this group of issuers.

How issuers may react to the surprising new exemption criteria for prepaid card programs.

What the upside is in being designated a regulated payment card network.The long-term impact of the Durbin Amendment as a catalyst for material change in the current system of interchange fees.

The areas where the Amendment has the potential to start a new round of market constriction, and the providers that would benefit from this shift.

One of 11 exhibits in this report:



This report is 35 pages long and has 11 exhibits.

Companies mentioned in this report include: Federal Reserve Bank, Visa, MasterCard, American Express, PayPal, First Data, PULSE, Shazam, Fiserv, FIS, Citibank, JPMorgan Chase, Wells Fargo, PNC Bank, U.S. Bank, and Discover.

Members of Mercator Advisory Group have access to this report as well as the upcoming research for the year ahead, presentations, analyst access and other membership benefits.

Please visit us online at www.mercatoradvisorygroup.com.

For more information and media inquiries, please call Mercator Advisory Group's main line: (781) 419-1700, send E-mail toinfo@mercatoradvisorygroup.com.

For free industry news, opinions, research, company information and more visit us atwww.PaymentsJournal.com.

2011 PCI Community Meetings Break Record for Number of Attendees

Five years after Council inception, unprecedented meeting turnout sets stage for increased participation in standards development for 2012

October 20, 2011 04:00 AM Eastern Daylight Time 


WAKEFIELD, Mass. & LONDON--(BUSINESS WIRE)--The PCI Security Standards Council (PCI SSC), a global, open industry standards body providing management of the Payment Card Industry Data Security Standard (PCI DSS), PIN Transaction Security Requirements (PTS) and the Payment Application Data Security Standard (PA-DSS), today announced the successful completion of its 4th annual Community Meetings and the start of the next phase of development for the newest versions of the PCI DSS, PA-DSS and supplemental guidance on technologies and processes in payments security.
“The PCI Community Meetings are, very simply, all about the community”
Marking the PCI Council’s 5th year in existence, close to 1600 stakeholders representing 650 organizations globally attended the 2011 meetings, compared with 323 at the Council’s first gathering in 2007. More than 500 of these participated in the European Community Meeting, reflecting record interest and participation from this region specifically.
The Community Meetings signal the official feedback period for the three-year lifecycle of the PCI DSS and PA-DSS, which gives Participating Organizations the opportunity to provide suggestions and commentary on the development of the next PCI Standards. Beginning November 1, input can be submitted through a new online tool that makes feedback easier to supply. All feedback will be vetted and where appropriate incorporated into discussion for the next iteration of the PCI Standards. As part of next year’s Community Meetings, Council staff will report on feedback received.
In addition to feedback and discussion around the latest version of the PCI Standards, highlights at this year’s meetings included:
  • The Council’s ongoing examinations of technologies in payments, including the recently released PCI Point-to-Point Encryption Solution Requirements, as well as guidance on PA-DSS and mobile payments
  • Proposals for Special Interest Groups (SIGs) on new topics that evaluate additional payment processes and technology
  • PCI insights from leading merchants and PCI Board of Advisors members including British Airways, McDonald’s Corporation and Woolworths Limited
“In addition to an excellent turnout, it was great to see a number of new sessions and opportunities for networking built into the agenda,” said John Graham, VP Global Information Assurance & Risk, First Data Corporation. “As a Board of Advisor member, I was especially encouraged to see the level of engagement and collaboration fostered through this year’s meetings. I look forward to building on this in the year ahead as we enter into the standards feedback period and continue to look at evolving technologies and their impact on payment security.”
"The PCI Community Meetings are, very simply, all about the community,” said Bob Russo, general manager of the PCI Security Standards Council. “Bringing the most preeminent payment experts in the world together in one place to foster open discussion and collaboration benefits the entire payments security landscape. We are pleased with the huge turnout and the dedication of so many individuals to help evolve the PCI Standards to better protect payment card data over the past 5 years. Through the feedback and collective experience of our members we will ensure that the PCI Standards continue to serve as the most solid foundation for payment card security, globally.”
PCI Security Standards Council European Director Jeremy King added, “We outgrew our venue here in London for the European Community Meeting this year, and I couldn’t be more thrilled! The representation at this meeting is a strong testament to the great strides that together as a European community we’ve made in increasing awareness and growth of payment card security and the PCI Standards in the European region. I’m already looking forward to next year!”
About the PCI Security Standards Council
The PCI Security Standards Council is an open, global forum that is responsible for the development, management, education, and awareness of the PCI Data Security Standard (PCI DSS) and related standards that increase payment data security. Founded in 2006 by the major payment card brands American Express, Discover Financial Services, JCB International, MasterCard Worldwide and Visa Inc., the Council has more than 600 Participating Organizations representing merchants, banks, processors and vendors worldwide. To learn more about playing a part in securing payment card data globally, please visit: http://pcisecuritystandards.org.
Connect with the PCI Council on LinkedIn: http://www.linked-in.com/company/pci-security-standards-council.

Online Banking Report Highlights $873 Million Lost as Consumers Walk Away Frustrated


Opening Online Bank Accounts: When It Comes to Consumers, Failure Is Not An Option

Javelin’s Online Account Opening Report Reveals Banks Are Unnecessarily Losing Over $873 million of Potential Revenue, As Consumers Walk Away Frustrated
SAN FRANCISCO--(BUSINESS WIRE)--On the heels of banks charging fees on debit card usage due to declining revenue, Javelin Strategy & Research’s latest research report — “2011 Online Account Opening:Faulty Process Hobbles FIs in the Battle for Customer Acquisition, Profitability and Retention” — reveals that financial institutions (FIs) lost at least $873 million dollar, conservatively, in potential revenue, as 5.8 million customers attempted - and failed - to open accounts online. Encountering failure, consumers engaged in an application process that was more costly for FIs or abandoned their efforts and took their business elsewhere. The report is based on data collected from more than 5,000 consumers, as well as examination of online account offerings at the 10 largest U.S. FIs and five technologically oriented smaller banks and credit unions. Javelin identifies the obstacles consumers experience when opening accounts online, analyzes the success and failure rates of different consumer segments, and recommends specific actions FIs can take to fix the process.
“Our report provides insight into how to improve the odds of successful online account applications for all consumer segments and establish effective online relationships with customers.”
First impressions are everything, and FIs risk their reputations - and relationships with customers - when the online application process goes awry. The desire to save time was the consumer’s primary motivation to apply online for a checking account. However, only 53% of these applicants were able to successfully open and fund their account. The other half abandoned the process, had to go into the branch to complete the rest of the applications process, couldn’t open the type of accounts they wanted, or faced other issues.
“With 50/50 odds, a consumer’s chance of successfully opening and funding an online account is a virtual coin toss,” notes Mark Schwanhausser, Senior Analyst, Multichannel Financial Services at Javelin. “Successful online account openings reduce acquisition and servicing costs for FIs, launch new customer relationships, and deepen online relationships with more profitable, tech-savvy, self-service consumers. Consumers that experience problems will go elsewhere, and FIs will miss out on revenue and cost-savings opportunities.”
FIs will learn how different consumer segments succeed - and fail- at opening accounts online. Javelin found that 68% of the tech-savvy Moneyhawks – who use online banking, pay bills through their primary FI, and use mobile banking -- were able to open and fund their online accounts. This means that almost one-third of Moneyhawks was unable to open and fund a checking account online, a cause of concern for FIs that don’t want to lose their relationships with this most profitable consumer group. FIs also risk losing revenue from the two-thirds of new customers who wanted to become a customer, but were unable to complete their applications online.
“Successful online account opening is key for all FIs and especially for smaller community banks that tend to draw a higher percent of newcomers, yet suffer higher failure and abandonment rates,” said James Van Dyke, President, Javelin. “Our report provides insight into how to improve the odds of successful online account applications for all consumer segments and establish effective online relationships with customers.”
Selected Key Report Findings – Online Account Opening
  • Nearly one-fourth of consumers applied online to open an account in the previous year, topped by checking, savings and credit card accounts.
  • “Secret shopper” survey of 15 banks and credit unions reveals that applications for other types off accounts are lower in part because FIs typically do not offer a full menu of accounts online. .
  • Mobile account opening is the next frontier, with insight from a credit union’s case study.
About Javelin Strategy & Research: Javelin Strategy & Research is the leading provider of quantitative and qualitative research focused on the global financial services industry. Our extensive quantitative data and deep analyst experience enable us to forecast the direction of the financial services market and make recommendations that empower you and your business to succeed.
For additional details or to purchase Javelin’s Online Account Opening report, click here https://www.javelinstrategy.com/brochure/226

American Express Reports Q3 Results: 1.2 Billion Net


American Express Reports Third Quarter EPS of $1.03 Up 14% from a Year Ago; Revenues Rise 9% to $7.6 Billion

NEW YORK--(BUSINESS WIRE)--American Express Company (NYSE: AXP) today reported third-quarter net income of $1.2 billion, up 13 percent from $1.1 billion a year ago. Diluted earnings per share was $1.03, up 14 percent from $0.90 a year ago.

(Millions, except per share amounts)
 

 Quarters Ended
September 30,
 Percentage
Inc/(Dec)
 Nine Months Ended
September 30,
 Percentage
Inc/(Dec)
2011 20102011 2010
Total Revenues Net of Interest Expense$7,571$6,9739%$22,220$20,3389%
 
Income From Continuing Operations$1,235$1,09313%$3,707$2,99524%
Income From Discontinued Operations, net of tax1
$-$--%$36$-#%
Net Income$1,235$1,09313%$3,743$2,99525%
 
Earnings Per Common Share – Diluted:
Income From Continuing Operations Attributable to Common Shareholders2
$1.03$0.9014%$3.08$2.4725%
Income from Discontinued Operations1
$-$--%$0.03$-#%
Net Income Attributable to Common Shareholders2
$1.03$0.9014%$3.11$2.4726%
Average Diluted Common Shares Outstanding1,1811,199(2) %1,1911,195-%
Return on Average Equity27.8%25.9%27.8%25.9%
 
# Denotes a variance of more than 100 percent
 
Consolidated total revenues net of interest expense were $7.6 billion, up 9 percent from $7.0 billion a year ago. The increase largely reflects continued strong growth in cardmember spending across all business segments and net interest income that was level with a year ago, following several quarters of declines.
Consolidated provisions for losses totaled $249 million compared to $373 million in the year-ago period reflecting continued improvement in credit quality.
Overall expense growth slowed significantly from the growth rates of recent quarters. Consolidated expenses totaled $5.6 billion, up 13 percent from $5.0 billion a year ago, reflecting higher rewards costs, which were partially offset by lower marketing and promotion expenses. The increase also reflected investments in certain business building initiatives. Consolidated expenses in the year ago period reflect the receipt of a settlement payment from MasterCard in the amount of $150 million. Consolidated expenses of $5.6 billion in the current period rose 10 percent when compared to adjusted consolidated expenses of $5.1 billion in the year ago period, which excludes the MasterCard settlement payment.3
The company's return on average equity (ROE) was 27.8 percent, up from 25.9 percent a year ago.
“We delivered strong bottom line results across all of our business segments this quarter,” said Kenneth I. Chenault, chairman and chief executive officer. “Revenue growth reflected a continuing return on the investments we’re making to enhance the services we provide consumers, small businesses, merchants and corporate customers.
“Cardmember spending was strong during the period, growing 16 percent to record levels and again outpacing most of the major bank card issuers. Credit quality continued to be excellent, with key lending metrics improving from the historically strong levels we achieved earlier in the year. The growth in operating expenses moderated this quarter, as planned, and we expect to further slow that growth towards the end of this year and into next.
"The overall results are showing the benefit of moves we’ve made to improve our risk profile, capture a greater share of cardmember spending, grow fee-based revenues and build additional flexibility into the way we manage expenses. Those moves have put us in a strong competitive position. They have also generated resources to invest in initiatives that bring customers and merchants more closely together as the worlds of online and offline commerce converge.
“We have been generating strong momentum and plan to continue investing to grow the business. But, against the backdrop of an uncertain economic environment, we are focused on maintaining a strong risk profile and carefully managing expenses.”
Segment Results
U.S. Card Services reported third-quarter net income of $733 million, up 23 percent from $595 million a year ago.
Total revenues net of interest expense increased 6 percent to $3.8 billion from $3.6 billion. Revenue growth reflects higher cardmember spending. Net interest income was unchanged from year ago levels.
Provisions for losses totaled $143 million, down 48 percent from $274 million a year ago. The decline reflects continued improvement in credit quality.
Total expenses increased 7 percent. Marketing, promotion, rewards and cardmember services expenses increased 11 percent from the year-ago period. This increase primarily reflects higher volume-related rewards costs and a small increase in the ultimate redemption rate estimate for the Membership Rewards program. These increases were partially offset by lower marketing and promotion costs. Salaries and employee benefits and other operating expenses decreased 1 percent from year-ago levels.
The effective tax rate was 36.3 percent compared to 38.7 percent in the year-ago quarter.
International Card Services reported third-quarter net income of $221 million, up 53 percent from $144 million a year ago.
Total revenues net of interest expense increased 16 percent to $1.3 billion, from $1.2 billion, reflecting higher cardmember spending and the acquisition of Loyalty Partner in the first quarter of this year. This was partially offset by reduced net interest income due to a lower yield on the loan portfolio.
Provisions for losses totaled $101 million, up 58 percent from $64 million reflecting a reserve release in the year ago period.
Total expenses increased 9 percent. Marketing, promotion, rewards and cardmember services expenses increased 7 percent from year-ago levels, reflecting higher volume-related rewards costs and co-brand expenses. Salaries and employee benefits and other operating expenses increased 11 percent from year-ago levels, in part reflecting expenses related to Loyalty Partner.
The effective tax rate was (16.9) percent compared to (9.9) percent in the year-ago quarter.
Global Commercial Services reported third-quarter net income of $197 million, up 31 percent from $150 million a year ago.
Total revenues net of interest expense increased 5 percent to $1.1 billion, reflecting increased spending by corporate cardmembers, partially offset by lower travel commissions and fees.
Provisions for losses were a credit of $17 million compared with an expense of $21 million a year ago, reflecting changes in estimates for certain credit reserves.
Total expenses increased 6 percent. Marketing, promotion, rewards and cardmember services expenses increased 44 percent from the year-ago period, primarily reflecting higher rewards costs. Salaries and employee benefits and other operating expenses increased 1 percent from the year-ago period.
The effective tax rate was 26.8 percent, compared to 33.6 percent in the year-ago quarter.
Global Network & Merchant Services reported third quarter net income of $332 million, up 32 percent from $252 million a year ago.
Total revenues net of interest expense increased 14 percent to $1.3 billion, from $1.1 billion, reflecting higher merchant-related revenues driven by an increase in total cardmember spending, as well as an increase in revenues from Global Network Services’ bank partners.
Total expenses increased 6 percent. Marketing, promotion, rewards and cardmember services expenses decreased 6 percent from the year-ago period. Salaries and employee benefits and other operating expenses increased 11 percent, reflecting business-building investments.
The effective tax rate was 35.4 percent compared to 38.5 percent in the year-ago quarter.
Corporate and Other reported a third-quarter net loss of $248 million compared with a net loss of $48 million a year ago. The current quarter reflects investments in Enterprise Growth Group initiatives, charges related to legal exposures, and income of $70 million ($43 million after-tax) for the previously announced Visa settlements. The year ago quarter included the same amount from the Visa settlements, as well as $150 million ($93 million after-tax) from a related settlement with MasterCard.
About American Express
American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success. Learn more at americanexpress.com and connect with us on facebook.com/americanexpress,foursquare.com/americanexpresslinkedin.com/companies/american-expresstwitter.com/americanexpress, andyoutube.com/americanexpress.

Datacard Group Announces EMV® Technology and NFC Adoption Seminar in San Francisco


Educational Seminar Focused on Helping Educate Financial Card Issuers on EMV Technology, NFC Adoption and How the Two Technologies Converge
MINNETONKA, Minn.--(BUSINESS WIRE)--Datacard Group, the world leader in secure ID and card personalization solutions, today announced that it will be hosting a seminar in San Francisco on Nov. 8th focused on educating bank executives, financial card issuers, acquirers, service bureaus and retailers on EMV® technology and Near Field Communication (NFC) adoption in the U.S. marketplace.
“Datacard Group is pleased to be hosting another seminar to help U.S. card issuers understand the EMV technology infrastructure and how to easily integrate this into their card programs”
This three-hour seminar—held at SOMA, 795 Folsom Street 1st Floor in San Francisco—is part of Datacard Group’s EMV technology educational series led by Guy Berg, a global industry expert for Datacard Group. The seminar is designed to help increase awareness of EMV technology requirements, as well as walk attendees through where and how EMV technology and NFC capabilities converge. In addition, it will address the implications of the recent announcement made by Visa, Inc. regarding their timeframes for market adoption of these two technologies.
Datacard Group, with more than 200 EMV technology solutions implemented globally, is uniquely positioned in the market to help companies easily migrate to EMV technology in the U.S. Datacard®solutions currently issue over five million smart cards everyday worldwide.
Berg, who has more than 20 years' experience in the banking and credit and debit card industry, has worked on global EMV technology projects over the past 12 years and is considered an industry expert in EMV technology, U.S. contactless chip cards, NFC payments and the electronic payment ecosystem. In addition, he is known for his the ability to present EMV technology topics in an easy-to-understand manner and has presented at numerous conferences around the globe, including Smart Card Alliance EMV technology workshops and most recently at the Merchant Advisory Group (MAG) U.S. EMV technology migration panel.
“Datacard Group is pleased to be hosting another seminar to help U.S. card issuers understand the EMV technology infrastructure and how to easily integrate this into their card programs,” said Berg. “EMV and NFC technology, unlike magnetic stripe technology, is a much more cross-functional integrated payment application, which means each entity—whether it is an issuer, acquirer, service bureau or retailer—is affected by this payment ecosystem. Understanding the role of each and how this will affect them will help lay the foundation to better understand how to implement these technologies.”
Datacard® Secure Issuance Anywhere™ includes EMV technology and provides customers the flexibility to issue and replace cards anytime, anywhere, with complete security. This integrated platform includes scalable and flexible hardware, software, supplies, consultation and project management for card and credential management – with the capability to easily combine central issuance orinstant issuance, as well as emerging mobile issuance into a single, integrated solution.
For more information, or to register for the event, please visit www.datacard.com/emv-card-issuance-seminar
About Datacard Group
Datacard Group is building on a 40-year heritage of innovation and customer success. Our portfolio of solutions, backed by expert service and support, enable card and secure ID programs for financial, government and other markets worldwide. With an unmatched commitment to customer satisfaction, Datacard remains the industry’s leading brand of secure ID and card personalization solutions.www.datacard.com

CARTES & IDentification Announces 30 Sesame Awards Finalists


CARTES & IDentification 2011: 16th Edition of the SESAMES Awards at the Automobile Club de France

317 applicants, 30 finalists: 10 of them will receive an award on Monday 14th November 2011 at an exceptional ceremony
CARTES & IDentification 2011
PARIS--(BUSINESS WIRE)--Organized as part of the CARTES & IDentification trade show, the SESAMES Awards reward the best technological innovations in terms of digital security and smart technology since 1995. The SESAMES Awards are now the world reference for smart card manufacturers and their environment. As undisputed labels of innovation, they provide a promotional opportunity, as well as reputation and credibility to the winning participants. These awards are not only intended for CARTES & IDentification exhibitors, but also more broadly for all global players in the sector: manufacturers, users, integrators and developers.
“The SESAMES Awards have never stopped producing a “powerful effect”
"The SESAMES Awards have never stopped producing a “powerful effect” in the Smart Industry’s ability to explore new borders and reinvent itself through innovation. The 2011 edition proves it once more: there are twice more NFC references than in 2010, more attention given to the end user and identity issues. And finally a discreet innovation map where Turkey and China continue to assert themselves”, declares Yvon Avenel, Chief Editor - SmartCards Trends and SC e-News.
The race for the SESAMES 2011
The SESAMES Awards are selected by an international panel of 39 experts chosen for their commitment within organizations, which promote and develop smart technologies. They evaluate the candidates independently and impartially on an encrypted and secured platform.
On the eve of the CARTES & IDentification trade show, the 10 winners of the SESAMES Awards 2011 will receive their awards during a ceremony organized in the magnificent setting of the Automobile Club de France. The main champions still in the race for the award include Gemalto, Oberthur Technologies, NXP semiconductors, Turkcell, Infineon Technologies… They will attend this prestigious event, along with the small and medium-sized companies for whom the SESAMES represent a real springboard for recognition.
30 finalists divided into 10 separate categories:
HARDWARE SESAME 
The finalists are Infineon Technologies with S-MFC1.x, FCOSTM goldless package; Dynamics Inc. with Chip & Choice™; Garanti Payment Systems with BonusluAvea.
SOFTWARE SESAME 
The finalists are Oberthur Technologies with ID One Digital watermark, and NFC e-Wallet; NXP Semiconductors with Open source NFC Host Software stack for Android.
- IDENTIFICATION / ID CARDS SESAME 
The finalists are HID Global with Next Generation Secure Identity Ecosystem; Intercede with PIV Credentials on a BlackBerry phone;Smart Packaging Solutions with Embedded Contactless Module.
IT SECURITY SESAME 
The finalists are Gemalto with One4all; Gemalto with Just4YourEyes; Nets Denmark A/S with PCI OEM Module.
- TRANSPORTATION SESAME 
The finalists are ASK with TicketTac; INSIDE Secure with VHBR; Mastercard with City Card on MasterCard M/Chip™ Advance.
BANKING / RETAIL / LOYALTY SESAME 
The finalists are Simartis Telecom SRL with Bubble; Turkcell with Turkcell Mobile Wallet (Turkcell Cep-T C├╝zdan); Watchdata System Co. Ltd. with SC-NFC;
TRUSTED INTERNET / AUTHENTICATION SESAME 
The finalists HID Global with Next Generation Secure Identity Ecosystem; NXP Semiconductors with On-card gesture recognition;Trusted Designer with Certphone.
MOBILITY SESAME 
The finalists are GoTrust Technology Inc with SWP microSD; NXP Semiconductors with PN65 Secure NFC module; Trusted Logicwith Trusted User Interface for Android devices.
- E-TRANSACTIONS SESAME 
The finalists are BPC Banking Technologies with BeeSmart Card; Buyster with Buyster mobile payment; Verifone with PAYware Mobile Enterprise.
MANUFACTURING & TESTS SESAME 
The finalists are Infineon Technologies with S-MFC1.x, FCOSTM goldless package; Oberthur Technologies with ID One Digital watermark; VFP with UVICARD®.
Be there on November 14th from 8pm at the Automobile Club de France to find out who the 10 winners of the SESAMES 2011 are (invitation only).
To get more information on the SESAMES, visit our web site www.cartes.com or blog www.blogcartes.com.
About CARTES & IDentification 2011 
Leading international event on the market of the digital security and payment solutions, CARTES & IDentification will take place at Parc des Expositions - Paris-Nord Villepinte from the 15th to the 17th of November 2011. With 450 exhibitors and 140 conference sessions with international experts, the event welcomes 20,000 visitors to find out the latest trends and innovations of the sector (mobile payment, contactless, biometrics, M2M).
Turkey is the honored country in 2011, a very dynamic market in the use of credit cards and contactless infrastructures. The SESAMES Awards reward every year, the 10 best innovations of the industry and are revealed the day before the show.
To access the latest news on CARTES & Identification: www.cartes.com / www.blogcartes.com
Follow us on Twitter @_cartes, and use the #cartes2011 hashtag 
Look at the videos of CARTES & Identification: http://www.youtube.com/user/CARTESetID

Fifth Third Bancorp Announces Third Quarter 2011 Net Income to Common Shareholders of $373 Million or $0.40 Per Share


  • 3Q11 net income available to common shareholders of $373 million or $0.40 per diluted common share
    • EPS up 14 percent versus $0.35 per share in 2Q11; up 82 percent versus $0.22 per share in 3Q10
    • Net income to common increased 14 percent versus $328 million in 2Q11; increased 112 percent versus $175 million in 3Q10
  • 3Q11 net income of $381 million
    • 3Q11 return on assets of 1.3 percent
    • 3Q11 return on average common equity* of 11.9 percent; return on average tangible common equity* of 14.9 percent
  • Pre-provision net revenue (PPNR)* of $617 million
    • Net interest income (FTE) of $902 million, up 4 percent sequentially; net interest margin 3.65 percent; period end loans up 2 percent sequentially driven by 4 percent growth in C&I loans
    • Noninterest income of $665 million, up 1 percent sequentially driven primarily by securities gains, stronger mortgage-related revenue, and service charges on deposits, partially offset by the sequential effects of valuation adjustments on Visa total return swap and Vantiv puts and warrants
    • Noninterest expense of $946 million, up 5 percent sequentially driven by costs related to the termination of certain FHLB borrowings and hedging transactions
  • Credit trends remain favorable
    • 3Q11 net charge-offs of $262 million (1.32 percent of loans and leases), the lowest level since 4Q07, versus 2Q11 NCOs of $304 million and 3Q10 NCOs of $956 million ($510 million on the sale or transfer of loans to held-for-sale and $446 million of losses on remaining loan portfolio)
    • Total nonperforming assets of $2.1 billion including held-for-sale declined $123 million or 5 percent sequentially; nonperforming assets excluding held-for-sale of $1.9 billion declined $144 million or 7 percent; lowest levels since 2Q08
    • NPA ratio of 2.44 percent down 22 bps from 2Q11, NPL ratio of 1.93 percent down 16 bps from 2Q11; Gross NPL inflows of $418 million down 25 percent sequentially
    • Total delinquencies (includes 30-89 days past dues and over 90 days past dues) flat sequentially
    • Allowance to loan ratio of 3.08 percent, 125 percent of nonperforming assets, 158 percent of nonperforming loans and leases, and 2.4 times 3Q11 annualized net charge-offs
    • No direct European sovereign exposure; total exposure to European peripheral** borrowers less than $0.2 billion; gross exposure to European banks less than $0.3 billion
  • Strong capital ratios; exceed fully phased-in Basel III proposed standards
    • Tier 1 common ratio 9.33 percent, up 13 bps sequentially (pro forma*** ~9.8 percent on a fully-phased in Basel III-adjusted basis, estimated among highest of large cap U.S. banks)
    • Tier 1 ratio 11.96 percent, Total capital ratio 16.25 percent, Leverage ratio 11.08 percent
    • Tangible common equity ratio* of 8.63 percent excluding unrealized gains/losses; 9.04 percent including unrealized gains/losses
  • Book value per share of $13.73, tangible book value per share* of $11.05
    • Tangible book value per share growth 5 percent from 2Q11, 13 percent from 3Q10
* non-GAAP measure; See Reg. G reconciliation on page 32 in Exhibit 99.1 of 8-k filing dated 10/20/11
** Greece, Ireland, Italy, Portugal, Spain
*** Current estimate (non-GAAP), subject to final rule-making and clarification by U.S. banking regulators; currently assumes unrealized securities gains are included in common equity for purposes of this calculation
CINCINNATI--(BUSINESS WIRE)--Fifth Third Bancorp (Nasdaq: FITB) today reported third quarter 2011 net income of $381 million, compared with net income of $337 million in the second quarter of 2011 and net income of $238 million in the third quarter of 2010. After preferred dividends, third quarter 2011 net income available to common shareholders was $373 million or $0.40 per diluted share, compared with second quarter net income of $328 million or $0.35 per diluted share, and net income of $175 million or $0.22 per diluted share in the third quarter of 2010.
“Return on assets was 1.34 percent and we generated a return on average tangible common equity of nearly 15 percent. Tangible book value per share grew a strong 5 percent sequentially.”
Third quarter 2011 results included a $17 million reduction in other noninterest income related to the valuation of a total return swap entered into as part of the 2009 sale of Visa, Inc. Class B shares. There were similar reductions of $4 million in the second quarter of 2011 and $5 million in the third quarter of 2010. Third quarter 2011 results included $3 million in positive valuation adjustments on Vantiv LLC puts and warrants, compared with positive $29 million in the second quarter of 2011 and negative $5 million in the third quarter of 2010. Third quarter 2011 results included investment securities gains of $26 million, compared with $6 million in the second quarter and $4 million in the year ago quarter. Third quarter 2011 results also included $28 million of expense related to the termination of certain FHLB borrowings and hedging transactions. Third quarter 2010 net income included a pre-tax benefit, net of associated expenses, of $127 million from the settlement of litigation related to a bank-owned life insurance (BOLI) policy.

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