Credit

Bankruptcy filings in the federal courts for the 12-month period ending March 31, 2008, exceeded 900,000, according to statistics released Tuesday by the Administrative Office of the U.S. Courts.

Target Corp., had net write-offs in its credit card business of $161 million during the first quarter ended May 3, rising 62.6% from net write-offs of $99 million in the year-ago quarter, the retailer and issuer reported late Monday.

The rosy outlook for profits outlined last week by MasterCard Worldwide is justified, with a few caveats, analysts at Stifel, Nicolaus & Co. note in a report issued today. The Baltimore, Md.-based research company raised its price estimate for MasterCard stock well above previous forecasts, from $312 to $367 per share. In their report, the analysts wrote that some investors wonder how MasterCard could forecast double-digit revenue growth during an economic downturn (CardLine, 5/30). The key to the card brand's success is that higher consumer prices do not mean lower payment card volume, the researchers say. Moreover, strong growth in international markets is driving transaction-volume growth around the world, as are such new payment technologies as prepaid and contactless cards. MasterCard's bullish outlook of achieving average annual net-income growth of 20% to 30% "is not only achievable, but surpassable," according to the report. The only possible obstacles to MasterCard's reaching its goals would be a sharp slowdown in global consumer spending or significant regulatory changes that could affect merchant fees in the United States and in Europe, the analysts wrote. Investors might also be deterred by MasterCard's rising stock price. "The stock is not cheap, and the valuation could be vulnerable to increased economic concerns," the analysts wrote. MasterCard stock today was selling at about $310.06 per share in midday trading, down $9.94, or 3.1%, from yesterday's closing price.

Target Corp. had net income of $602 million for its fiscal first quarter ended May 3, down 7.5% from $651 million in the same three months last year, the retailer and card issuer reported late Monday. Credit card revenues totaled $500 million, up 19.6% from $418 million in the same period last year. Credit card expenses totaled $274 million, increasing 61.2% from $170 million. Net write-offs for Target's credit card business were $161 million, up 62.6% from $99 million. Net write-offs as a percentage of average receivables grew to 7.6% from 6% a year ago. "As expected, net write-offs in the first quarter increased substantially," Target said in its 10-Q filing with the U.S. Securities and Exchange Commission. "This year-over-year change is due to two primary factors: the unsustainably strong performance in this metric in last year's first quarter and the increased write-off activity concentrated in four states that have been particularly affected by housing-related weakness: Florida, Arizona, Nevada and California."

Rumors of Mr. Bill's demise at the hands of Mr. Hands and Sluggo are greatly exaggerated. More than 30 years after the clay figure first appeared on NBC-TV's Saturday Night Live, with his trademark yelp, "Oh, noooo," Mr. Bill will be starring in advertisements for MasterCard Worldwide's debit card. During regular appearances on the late-night television show for seven years, Mr. Bill was stabbed, set on fire, scalped, flattened and maimed—just to name a few of the indignities he endured. So why bring back the long-suffering star? "Mr. Bill is an iconic character who is always on the receiving end of situations Mr. Hands bestows upon him. In our new spot, we put a sunny twist on Mr. Bill's adventures," Chris Jogis, MasterCard vice president of U.S. brand development, tells CardLine. The "Priceless" television spots will begin Monday. Although Mr. Bill likely will be best-remembered by consumers over the age of 35, MasterCard is not using the character to market to any particular group, according to Jogis, who cites "mass-market" as the chosen demographic for the ads. "Instead of using cash, debit MasterCard is a tool that helps consumers monitor and manage expenses, empowering them to be the financial hero of their everyday lives," Jogis says of the message MasterCard is trying to convey with the Mr. Bill ads.

Everlink Payment Service Inc., a Canadian provider of electronic transactions and payments services, today announced an agreement with Monitise Americas LLC to distribute a mobile-banking suite of services to financial institutions in Canada, including 375 credit unions. Monitise recently signed similar agreements with five United States-based financial institutions to distribute the suite of services through the NYCE electronic funds transfer network (CardLine, 2/4). Users can check account balances, view recent transactions, transfer funds and receive text-message alerts. Everlink hopes to add bill payment and person-to-person mobile payments in the future, the company says in a statement. Several domestic and foreign subsidiary banks in Canada and independent service organizations also will offer the service, the statement says.

NCR Corp. has raised $53,800 to help earthquake victims in China, Lorraine Russell, an NCR spokesperson, tells ATM&Debit News, a CardLine sister publication. NCR employees in China raised $23,800, and company employees in Japan raised another $5,000. The NCR Foundation, which is based in Dayton, Ohio, more than matched the employees' donations. NCR, the world's largest ATM manufacturer based on 2007 shipments, operates an ATM-manufacturing plant in Beijing. The earthquake, which struck May 12, killed 69,000 individuals, according to news reports. Nearly 19,000 are missing. NCR also is working with several banks, including Agricultural Bank of China in Sichuan Province, where the earthquake occurred. The disaster destroyed 65 of Agricultural Bank of China's ATMs. NCR employees are discussing with Agricultural Bank employees deployment of mobile ATMs and cash-recycling systems to replace the destroyed machines, Russell says. "China is a cash society, and by keeping cash circulation it helps restore normalcy," she says.

MasterCard Worldwide predicted double-digit net-revenue growth for the year and boosted its long-term profit outlook yesterday during a conference with analysts, marking the second anniversary of the company going public in May 2006. Robert W. Selander, MasterCard president and CEO, told analysts that while the U.S. economy's growth has slowed and retail sales are down in nearly every category, emerging international markets continue to show strong growth, including Brazil, Hungary, Poland and Russia. MasterCard revised its long-term performance goal for the next three years beginning in 2009 to an average annual net income growth of 20% to 30% from its previous goal of 15% to 20% growth, fueled by debit card growth, cross-border transaction and processing fees, and expansion into new markets, particularly in China and India. The company said it expects to see average annual net-revenue growth in the 12% to 15% range, up from its previous 8% to 10% growth goal. Selander noted that since MasterCard's initial public offering, the company's share price has increased sevenfold, and he expects the company to continue to produce strong results despite present economic challenges. "We are clearly operating with weakened economic conditions in many parts of the world," Selander said. MasterCard stock was trading at about $314 per share at midday today, close to its all-time high of $316 per share

BB&T Corp. has adopted InterConnect, a risk and customer relationship management system developed by the credit bureau Equifax Inc., the companies will announce Tuesday.

General Electric Co. on Monday signed a deal announced in March to sell its credit card and automotive-lending businesses in the United Kingdom and its GE Money units in Germany, Finland, Australia and Ireland to Spain-based Banco Santander. The parties valued the deal at US$1.5 billion (1 billion euros). The Irish unit was not part of the deal when it was announced earlier this year. In return, GE Consumer Finance acquires Interbanca, an Italian commercial bank assigned to Banco Santander in 2007 as part of its purchase of holdings from Dutch bank ABN Amro (CardLine Global, 28 March). GE did not respond to requests for comment from CardLine Global. The deal remains subject to regulatory approvals, but the companies expect to close the deal early in the fourth quarter, according to published reports.

First Data Corp. and Frontier Airlines Holdings Inc. on Friday announced an agreement in which the Greenwood Village, Colo.-based payments processor will continue to process Visa and MasterCard charges for the airline's customers. The agreement provides First Data with appropriate protection for processing customer credit card purchases on a "business-as-usual" basis, according to a news release. First Data declined to comment on the agreement. A Frontier Airlines spokesperson also declined to give more details but did tell CardLine sister publication ISO&Agent Weekly the agreement "stabilizes another portion of our business, and it allows us to continue moving forward in the Chapter 11 process." Denver-based Frontier filed for Chapter 11 bankruptcy protection April 10 following what it called an unexpected move by First Data to "substantially increase" the amount it withholds to cover potential losses based on risk (CardLine, 4/11). "The First Data thing wasn't the only reason" for filing for bankruptcy protection, the spokesperson says. "Obviously, the rising fuel costs are probably the biggest culprit–not just for us but every single airline." Frontier filed a motion Friday with the federal bankruptcy court in New York to approve the agreement, but a hearing date had not been set.

Sixty percent of households that contributed online to a presidential campaign supported a Democratic presidential candidate, according to Synergistics Research Corp. More than one-fifth of the respondents, or 22%, made online donations to a Republican candidate this election year, 2% made online contributions to an independent candidate, and the remainder refused to specify the candidate's party affiliation, says Genie Driskill, chief operating officer of the Atlanta-based research group. The survey also revealed 9% of households with Internet access overall made political contributions online, households earning less than $30,000 per year and households earning more than $100,000 leading middle income groups with 13% each. "It seems to be what you would expect of the groups that contribute in terms of household income with the more-affluent … and the younger consumers who would fall into the [lower] income group," Driskill tells CardLine. The survey of 1,001 households with Internet access concluded in April.

A U.S. District Court judge in Chicago last week approved a preliminary settlement of a class-action lawsuit against TransUnion that claimed the Chicago-based credit bureau violated the Fair Credit Reporting Act when it sold marketing lists. TransUnion will provide affected consumers with nine months of free credit reports. The class includes U.S. consumers who had bank- and retailer-issued credit cards between Jan. 1, 1987, and May 28, 2008.

To grow its Zip contactless payment platform, Discover Network has in place the chip orders, the merchant acquirer programs, terminal hardware deals and, of course, the user base.

The good news is that credit-card issuers are pretty good at resolving fraud claims. The bad news, according to a report from Javelin Strategy & Research on the 25 top card issuers, is that preventing and detecting fraud leaves much to be desired.

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