If Total System Services Inc. were a baseball team, the transaction processor’s third quarter would constitute a rebuilding season.
During a conference call with analysts Oct. 20, executives at the Columbus, Ga.-based company were optimistic about developments abroad as the company, which is still recovering from the downturn in the economy, attempts its comeback.
“They are trying to develop the farm team, which is merchant acquiring, and they are trying to take advantage of the free agents and are going after some acquisitions,” says Thomas C. McCrohan, managing director for equity research at Janney Montgomery Scott in Philadelphia. “They are trying to rebuild.”
TSYS announced its third-quarter earnings Oct. 20 (
Phil Tomlinson, TSYS chairman and CEO, said during the call the best prospects today are in Europe. The company will continue to move on “home markets” in the United Kingdom, Ireland and the Netherlands, he said.
“It is interesting,” Tomlinson said. “A year ago, I couldn’t have said Germany was a home market, but I can today.”
During the third quarter, TSYS signed an agreement with Permanent TSB, a Dublin, Ireland-based retail-banking company. The previously undisclosed accord brought TSYS its first European debit client, Tomlinson said.
TSYS also said it signed a multiyear contract with Bank of Montreal, Canada’s largest MasterCard issuer. TSYS will provide account processing and other services for the bank’s consumer and commercial credit card portfolios. (
The processor also announced a pact with Swisscard AECS AG, a joint venture of Credit Suisse AG and American Express Co. Swisscard agreed to use TSYS’s TS2 processing platform to manage its 1.2 million AmEx, Visa Inc. and MasterCard Worldwide consumer and commercial cards.
TSYS’s international deals do not detract from more-troubling domestic developments, analysts say.
Indeed, the company’s largest market is still the U.S. credit card space, says Robert Dodd, an analyst at Morgan Keegan & Co. “The U.S. credit card market is still shrinking,” he says. “They are getting some traction in some international markets, but the U.S. is by far [TSYS’s] biggest piece of their business. And the headwinds are still very strong.”
A Javelin Strategy and Research report released last month noted that 56% of consumers queried in 2009 had used a credit card in the past month, down from 87% who did in 2007. The Pleasanton, Calif.-based firm expects this trend to continue, at least for the short term.
“People just aren’t opening new credit card accounts,” Dodd says. “More often than not, you see people closing credit card accounts.”
The clouds are beginning to part for TSYS’s U.S. business, executives from the company said during the call. “The truth is, our news is brighter today than it’s been since early 2008,” Tomlinson said. “We’re not out of the woods yet, but we believe we are starting to see a little bit of daylight.”
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