Bankers' willingness to invest in technology suggests the financial industry is weathering the storm in the credit markets, according to Metavante Technologies Inc. executives.
Timothy C. Oliver, the Milwaukee vendor's chief financial officer, said during its second-quarter earnings conference call with analysts Monday that customers began delaying discretionary projects in the second half of last year.
"That phenomenon has continued, but it hasn't worsened," Mr. Oliver said. "We haven't seen any change in the last three quarters, and we're heartened by that."
Michael D. Hayford, Metavante's chief operating officer, said bankers' spending patterns have been stable. "We have been pleasantly surprised by the resilience of the community banks, regional banks, and even large banks. We've not seen anything in the market in the last 90 days that would suggest some decline is imminent."
The executives also stressed caution about Metavante's outlook as the economy continues to struggle with tight credit conditions and a difficult market for housing and mortgages.
"If the economy worsens, all bets are off," Mr. Hayford said. "So far we've been pleased."
John Kraft, an analyst at D.A. Davidson & Co., said investors should find reassurance in Metavante's results, which should bode well for its rivals and the financial institutions they serve.
"The market has been worried that the financial institution industry has deteriorated, and they specifically said it hasn't," Mr. Kraft said. "There was nothing about competitive takeaways. It was all about the market being not as bad as the doomsdayers have been worrying about."
Metavante said its second-quarter net income fell 13.9% from a year earlier, to $36.9 million, or 31 cents a share, beating the average Wall Street expectations by 2 cents. But it cautioned that the comparison is not meaningful, because the Milwaukee banking company Marshall & Ilsley Corp. spun off Metavante on Nov. 1.
Most critically, Metavante's interest expenses quadrupled, to $25.2 million, as a result of spinoff-related costs. Revenue rose 7%, to $424.8 million.
Metavante reiterated full-year earnings guidance of $1.15 to $1.20 a share and its organic revenue growth target of 4% to 6%.
Operating income from the payments business, which generates about two-thirds of the company's revenue, grew 19.9%, to $80.3 million. Revenue from that business rose 8%, to $260.6 million.
Metavante credited actions it took in its image business in the fourth quarter, when it took a $129.5 million pretax charge, most of which it attributed to "updated expectations for long-term financial performance" in the business.
Operating income from its other business, core processing and ancillary products and services, fell 7.2%, to $37.6 million. Metavante attributed the drop to its revenue mix, pricing, and increased investments in product development.
"The pain we felt in the first half was self-inflicted, discretionary spending," Mr. Oliver said.
Revenue from that business grew, 6% to $164.2 million.
Two acquisitions in January — the British processor Nomad Payments Ltd. and BenSoft Inc., the San Diego maker of the RepayMe health-expense software — added about 1 percentage point to Metavante's overall revenue growth.
Metavante continues to look for acquisitions, Mr. Hayford said. However, "pricing expectations continue to be high — what you would have seen six, nine, 12 months ago."
