Though its contract renewals are at record levels and revenue gains are strong, Metavante Corp.'s chief executive said he expects organic growth to slow in 2005.
The Marshall & Ilsley Corp. unit had 48 renewals for its outsourced core processing service, executives said during a conference call Thursday to discuss the parent company's fourth-quarter results.
The unit's CEO, Frank R. Martire, said during the call that 2004 was Metavante's best year for core contract renewals.
John Presley, Marshall & Ilsley's chief financial officer and a senior vice president, said on the call that Metavante's external revenue (excluding M&I-related transactions) grew 52% in the fourth quarter, to $268.8 million, and $35.5% for the year, to $891 million. Metavante's net income for the year was $80.4 million, Mr. Presley said. He did not provide a fourth-quarter profit figure.
Marshall & Ilsley, a banking company based in Milwaukee, reported overall fourth-quarter net income of $173.8 million.
Metavante's results include a pretax loss of $7.1 million on the sale of a 401(k) processing operation and Paytrust.com. The sale of the 401(k) business had been announced in December. The sale of Paytrust.com to the software firm Intuit Inc. had not been disclosed.
Metavante had acquired Paytrust Inc., a maker of online billing software, in 2002. Chip Swearngan, a Metavante spokesman, said that the sale did not include Paytrust's technology assets and that Metavante would continue to provide payment processing for those accounts on behalf of Intuit.
Mr. Martire, who is also Metavante's president, said on the call that Zions Bancorp of Salt Lake City had signed a contract for Metavante to provide an electronic bill presentment and payment service for Zions' online banking customers.
He said he expects the company to mid-single-digit organic growth in 2005, against last year's 10%.
Metavante's recent acquisitions are helping the company increase its cross-sales, Mr. Martire said. Of 10 recent core-processing renewals, seven included new contracts for other parts of the Metavante operation, he said, mentioning in particular Advanced Financial Solutions Inc. of Oklahoma City, a check-image software vendor, and NYCE Corp. of Montvale, N.J., the operator of a large electronic funds transfer network, both of which Metavante acquired in July.
Metavante made two big acquisitions in check imaging software last year to prepare for the Check Clearing for the 21st Century Act.
In addition to AFS, which targets smaller institutions and which operates the Endpoint Exchange digital check image network, it also acquired Vector SGI of Addison, Tex., which targets large banks.
Check imaging technology was initially expected to be a big seller in 2004, but actual sales industrywide were slow.
Asked on the call if uptake of the technology had fallen short of expectations, Mr. Martire called the sales "a minor disappointment, with adoption not happening as quickly" as some bankers had predicted.
However, banks are now beginning to clear checks by transmitting digital check image files instead of moving the original items, and many observers say that companies that offer this technology could be poised for strong growth.
Anthony R. Davis, an analyst at the brokerage firm Ryan Beck & Co. Inc. of Florham Park, N.J., said imaging technology could play a more important role in the future.
"They are just on the threshold of Check 21 opportunities to start hitting the bottom line," Mr. Davis said in an interview. "They really haven't done a lot yet; most banks are still trying to figure out which end is up on that. I'm looking forward to some very dynamic growth at Metavante for the next several quarters."
