Ask U.S. Bancorp CEO Richard Davis if he has any interest in the banking business outside of the U.S., and the answer is a quick no. There's plenty of growth to be had here at home, and the domestic system-for all of its exposed flaws-is better regulated and more familiar. But the same can't be said for the payments space, where the best new opportunities are found overseas.
Pamela Joseph, vice chairman of payment services for the $247 billion-asset company, spends much of her time leading U.S. Bank's charge into foreign markets. Over the past couple of years, she has re-branded her unit's merchant processing business and launched a European bank-Elavon Financial Services. Joseph has spearheaded the acquisitions of several payments players in Europe, and is eyeing the Pacific Rim. "Asia, possibly Australia," Joseph, 49, says. "In the merchant business, that's where we see the growth occurring."
Joseph's operation is a payments titan and crucial to the Minneapolis-based company's strong performance in tough times, accounting for 26 percent of U.S. Bank's total revenues and 37 percent of net income. Year-over-year earnings were up 16 percent during the first six months of this year, while revenues jumped 19 percent. Return on equity for the unit was 22.8 percent as of June, while return on assets was five percent. Over the past two years, revenue and net income have grown at compounded annual rates of 20 percent and 10 percent, respectively.
Under Joseph, U.S. Bank has emerged as the top Visa gift card issuer in the country, and ranks among the top five in commercial cards and merchant acquiring. It's also a top-10 player in both debit and retail card issuance, and provides payments services for 3,900 financial institutions worldwide.
Those operations are crucial to U.S. Bank, which gets more than half its revenue from fees. But Joseph also is grappling with the present credit storm. Her unit is responsible for a $11.6 billion card portfolio that in the second quarter reported a 4.84 percent charge-off rate-not great, she concedes, but better than most other big card operations. The keys, she says, are diligence and good partners. The bank offers affinity cards through Lexus, Harley Davidson and Northwest Airlines, among others, and through thousands of community banks. As a result, "we skew to a bit higher FICO score" than average.
Elavon chief Stuart Harvey, Jr., says Joseph's experience and relationship with Visa, regulators and business lines allow her to break down traditional silos and create a stronger whole. Personally, he adds, she's "intense" about results, but funny. "Pam has a real gift for using her sense of humor to relax people."
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