Bank technology stocks mainly rose last week, mimicking an equities market buoyed by rising bond prices and a strengthening dollar.
A number of firms in the bank card processing and payment systems were the big gainers, following a well-attended and upbeat American Bankers Association bank card conference in Chicago.
One speaker at the conference, Roger Peirce, former Visa U.S.A. executive and now president of electronic funds services at Hackensack, N.J.-based First Data Corp., said he expects First Data's business to grow despite continuing consolidation among credit card issuers.
Noting that electronic payment cards account for about 16% of the dollar volume in all consumer transactions, Peirce said the potential market is "six times our current share, and in the U.S. that comes to an annual opportunity of more than $4 trillion."
Investors are also seeing big dollar signs in the future for the payment systems industry, said Richard Bove, an analyst with Raymond James & Associates in St. Petersburg, Fla.
Mr. Bove said Wall Street has suddenly focused on payments technology firms because of the bidding war to acquire Western Union Financial Services Inc., a subsidiary of bankrupt New Valley Corp. The unit has been put up for auction by a U.S. Bankruptcy Court judge, and First Data and First Financial Management Inc. were expected to finalize their bids last Friday.
The price to acquire Western Union, whose main line of business is money transfer services for consumers, is expected top $1 billion, ML Bove said.
The auction "is much more significant than just who gets to buy Westem Union," Mr. Bove said, adding that he believes First Financial jumped into the bidding for Western Union to prevent First Data from gaining a quick competitive edge in its effort to build its merchant processing business.
"First Data realized it needs to get more processing for retailers directly rather than just be processing subcontractor to banks," he said. "They could become a real threat to First Financial, which has no real competition in merchant processing until now."
As a result, Mr. Bove said, the battle for Western Union could be just the opening salvo between the two companies as they seek to acquire other payments processing firms. "I think between the two of them, they could spend another billion dollars [on acquisitions] before they're through," he said.
He feels Wall Street's takeover speculation in this arena could be behind the recent boost in the stock of First Data's archrival, Total System Services Inc. Total System's common stock, 80% of which is owned by Synovus Financial Corp., rose over $3 a share last week, trading at $32.625 at midday Friday.
First Data's stock was trading at $45.625 a share midday Friday, and First Financial's common stock changed hands at $58 a share, unchanged for the week.
In other news, Mr. Bove said his firm had cut its eammgs estimate for bank software developer Hogan Sysmms Inc. for the company's second fiscal quarter ending this month.
He said he now expects Dallasbased Hogan to earn 10 cents a share for the quarter, down from his previous estimate of 15 cents.
He said revenues from software licenses were running less than anticipated for the period, though he noted that Hogan officials maintain they have a handful of big contracts pending.
Hogan's common stock was Wading at $6.625 a share at midday last Friday, down $0.875 for the week.