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by Christopher WoodMIDWEST, Harris Nesbitt Corp., the Chicago investment and corporate banking arm of, Toronto's Bank of Montreal, has hired Douglas Lawson as the head of the, packaging investment banking practice in its commercial and industrial, group., Mr. Lawson, who has also been named a managing director, was the head of, the packaging practice in Piper Jaffray & Co.'s middle-market mergers and, acquisitions group in Chicago., Before that he had been a director in the fixed-income origination group, at ABN Amro Inc. and, earlier, the head of the global project and, infrastructure group at Duff & Phelps Credit Rating Agency, which Fitch, Inc., bought in 2000., He has 20 years of finance and investment banking experience., MIDDLE ATLANTIC, Bank of New York has promoted Margo Cook from senior to executive vice, president and put her in charge of equity and fixed-income strategies for, institutional market at its asset management business., Ms. Cook, a member of Bank of New York's investment policy committee, led institutional fixed-income management for BNY Asset Management for the, past nine years., That job has gone to Patrick K. Byrne, who was a senior portfolio manager, at BNY Asset Management. He reports to Ms. Cook., SOUTHEAST, Commerce Capital Markets Inc., a Philadelphia unit of Commerce Bancorp, Inc. of Cherry Hill, N.J., has hired Jane-Marie Baker as its Florida market, president for brokerage and wealth management., Ms. Baker, who will be based in West Palm Beach, joined Commerce from, Bank of America Corp., where she was a senior vice president and a regional, director in the brokerage and wealth management division. Before that she, held the same job at FleetBoston Financial Corp., which B of A bought in, 2004., Earlier she had been the Florida market president at Fleet. Still earlier, she had held a variety of jobs at Charles Schwab Corp., including group, vice, president, regional director, area vice president, and branch manager., WEST, American Mortgage Network Inc., a San Diego unit of Wachovia Corp., hired Charlotte I. Catalfo as its president and chief operating officer., Ms. Catalfo was the senior managing director of correspondent lending at, CitiMortgage Inc. of O'Fallon, Mo. Before that she had been the executive, vice president of production and production administration at Principal, Residential Mortgage Inc., which Citigroup Inc. bought in 2005 and merged, into CitiMortgage., She has 30 years of mortgage banking experience.
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by Damian PalettaRecords obtained under the Freedom of Information Act and an interview with, Alan Greenspan reveal the pivotal role the former Federal Reserve Board, chairman played in the debate over reforming regulation of Fannie Mae and, Freddie Mac, and how closely he coordinated with White House officials on, issue., The records, provided to American Banker in response to an October *2004-, FOIA request, reveal 450 meetings Mr. Greenspan hosted at the Fed with 319, people from September 2003 through August 2005., Mr. Greenspan met with foreign dignitaries, bankers, Wall Street, executives, and cabinet officials, but many visitors were key players in, fight over cracking down on the government-sponsored enterprises., GSEs are a very serious financial issue for this country, Mr. Greenspan, I would have been derelict had I not, Mr. Greenspan held frequent meetings with White House officials who, agreed with him that Congress should create a strong new regulator with, authority over Fannie and Freddie., For example, on April 4, *2005-, Mr. Greenspan hosted a meeting with Allan, Hubbard, director of the National Economic Council, and Kevin Warsh, then, special assistant to the President on economic policy., Two days later, Mr. Greenspan testified before the Senate Banking, Committee, urging lawmakers to cap the mortgage portfolios of Fannie and, Freddie. The next day Treasury Secretary John Snow largely embraced Mr., Greenspan's position, saying a new regulator should be required to limit, portfolios., Mr. Greenspan met several other times with White House officials on the, GSEs and other issues., Those meetings included nine with Stephen Friedman, Mr. Hubbard's, predecessor at the White House, and eight more with Mr. Hubbard., Mr. Greenspan met three times with Mr. Warsh, who was instrumental in, setting the administration's GSE policy. The Senate confirmed Mr. Warsh, last, Friday for a seat on the Fed's seven-member board of governors. He is, rumored, to be a candidate to succeed Roger Ferguson as vice chairman, Mr. Ferguson, announced his resignation Wednesday. (See story page 2.), This data indicates just how closely the Fed and the White House may, have been working together ... on an issue that is critical to both, said Tom Schlesinger, the executive director of the, Financial, Markets Center, an independent, nonprofit research center that monitors the, Fed from Howardsville, Va., A White House spokeswoman did not return calls seeking comment., Mr. Greenspan also met multiple times with the chief executives of Fannie, and Freddie., Richard Syron, Freddie's CEO, met with Mr. Greenspan seven times between, January *2004-, a month after Mr. Syron took the job, and March 2005 -- more, than any other nongovernment official., Asked about the meetings, Mr. Greenspan said Mr. Syron, who formerly was, the president of the Federal Reserve Bank of Boston, Still, several of Mr. Syron's meetings came before Mr. Greenspan, testified on Capitol Hill about GSE issues, including a meeting in January, February, and March of last year., In contrast, former Fannie CEO Franklin Raines met with Mr. Greenspan, only twice, and Daniel Mudd, who took the reins last year after Mr. Raines, was ousted, met with the central banker once in February 2005., Mr. Greenspan, who retired Jan. 31 after 18 years atop the Fed, said that, he met with the companies' executives at their request, and that they, attempted to convince him their portfolios did not pose a threat to the, U.S., economy., I did not get credible rebuttals to the analysis which I presented in, Mr. Greenspan said., Former Fed Governor Edward Gramlich, now the provost at the University of, Michigan, said the complex GSE issue often came up at the weekly or, biweekly, economic briefings that the Fed governors hold with staff on Monday, mornings., The Fed's interests in this are pure as the driven snow, Mr. Gramlich, Greenspan was, and we were, A spokesman for Fannie declined to comment for this story. A spokeswoman, are former colleagues and, have, She deferred to the Fed on, content of the meetings., There were other GSE-related meetings. Mr. Greenspan met with Armando, Falcon Jr. on May 9, *2005-, just days before he stepped down as director of, the Office of Federal Housing Enterprise Oversight. In an interview, Falcon, now a principal at Canonbury Group, said that he requested the, meeting to discuss broader housing issues, but that they also discussed, congressional efforts to reform the GSEs., The records are incomplete because the Fed would name only visitors who, checked in to meet with Mr. Greenspan. The records do not include visitors, who might have first met with another Fed official and then visited the, chairman. The records also do not list meetings Mr. Greenspan had, elsewhere,, such as on Capitol Hill or at the White House., Still, the records offer a rare window into the breadth of issues that, Mr. Greenspan faced on a daily basis in his role as central bank chief., For example, he met with lawmakers or Hill staff members on 31 occasions, including four meetings with Sen. Charles Hagel, R-Neb. Mr. Greenspan also, twice, in September 2003 and September *2004-, with National Security Adviser, Condoleezza Rice, now the secretary of state., Mr. Greenspan met three times with former Treasury Secretary Robert Rubin, after he had become the chairman of the executive committee at Citigroup, Inc., He met four times with James Thain, the chief executive officer of the New, York Stock Exchange. He also met once with Stan O'Neal, the chief executive, of Merrill Lynch & Co., More than 100 of the 450 meetings were with international officials or, diplomats, including Gordon Brown, the U.K. chancellor of the exchequer, (three meetings), and Kamil al-Gailani, the Iraqi minister of finance (one, meeting).
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by Tim MazzuccaHSBC Holdings PLC outlined plans to expand its U.S. commercial banking., The $1.5 trillion-asset London company said Tuesday that HSBC Bank USA, Inc., which is based in New York, plans to open a commercial banking office, in Chicago before July and is scouting a location in Houston, Over the last three years HSBC has focused on opening commercial bank, offices on the Atlantic and Pacific Coasts, Brendan McDonagh, the chief, operating officer of HSBC Bank USA, said during a conference call with, analysts focused on its commercial banking strategy. The unit will now work, toward filling in the gaps between the coasts and expanding in the South, said., Opening a commercial office, or offices, near Houston would help the unit, forge closer ties with the parent's Mexican commercial banking operations., We're trying to replicate our U.S.-Canada team in creating, The unit currently has offices in 11 U.S. cities, including Seattle and, Portland, Ore., on the West Coast and New York, Buffalo, and Washington on, the East Coast., Mr. McDonagh did not say where it would open offices after Chicago and, Houston, markets according to density and has 16 of those markets covered., HSBC Bank USA expects to hire 14 relationship managers in its current, Commercial markets that HSBC considers among the top 25 but does not, currently cover include Detroit, Atlanta, Minneapolis, St. Louis, Diego,, Meanwhile, HSBC is creating a China trading desk in New York for, corporate and middle-market customers of the commercial bank. The company, offers a similar service to its corporate investment banking and markets, customers, Mr. McDonagh said., Last year HSBC Bank USA generated 29%, or $443 million, of its pretax, income from commercial banking and 33%, or $509 million, from personal, financial services or retail banking., The unit did not outline any growth targets or say how much it plans to, spend on the expansion. However, executives said they will spend equally on, new and current markets., The unit has already been focusing on expanding its retail and private, banking operations, mostly through organic growth., On Tuesday, it provided an update on its three-year initiative to open, 140 retail bank branches., The company said it is about a third of the way through the initiative, launched last year, and has opened branches in New Jersey, Philadelphia, Washington., From a retail point of view, we are largely a New York state bank, McDonagh said. Of HSBC's 430 U.S. retail bank branches, 385 are in New, York,, and the company said it is focusing on reducing that concentration., Gerard Aquilina, the chief executive of HSBC Private Bank in the, Americas, told American Banker last week that he would not rule out, acquisitions here to boost the company's private banking, but he plans to, open private banking offices that would piggyback the company's retail, banking expansion., This month HSBC Private Bank hired Marlon Young from Citigroup Inc. to, work with Mr. Aquilina on the unit's strategy. Mr. Young headed private, client lending at Citi's Smith Barney, where he spent 27 years. He also led, the Northeast region for Citigroup Private Bank and headed investment, finance, for the Northeast and Middle Atlantic regions., He started his new job last week. HSBC said he was not available for an, interview.
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by H. Michael JaliliAmerican Express Co. has refined its approach to partnerships with, card-issuing banks after hiccups in its arrangement with MBNA Corp., a UBS, Securities LLC analyst said., After meeting this week with Gary Crittenden, Amex's chief financial, officer, Eric E. Wasserstrom wrote in a research note issued Wednesday that, indicated that there were some unexpected challenges that, In the meeting (which Amex confirmed took place), Mr. Crittenden, that the difficulty arose with MBNA's operational managers --, its top executives -- in implementing the coissuing program, the note said., into its, pitch to -- and integration efforts with -- newer bank partners, Wasserstrom wrote., The New York firm has learned to educate bank managers focused on the, return on receivables to think more in terms of Amex's orientation toward, spending rather than lending, the note said., For example, it now has an account plan for each partner that specifies, which of its partner's accounts it is targeting for conversion to an Amex, product and demonstrates how that conversion is yielding returns for the, These are tools it did not have when it signed, Because Amex has adjusted its methods, Mr. Wasserstrom wrote, it would, take longer to roll out products with new partners., MBNA, of Wilmington, Del., was Amex's first issuing partner in the United, States after the Supreme Court refused to hear an appeal of a 2004 court, decision throwing out the exclusionary rules of Visa U.S.A. and MasterCard, Inc., opt-out, to convert Visa or MasterCard-branded cards, Amex -- until cardholders complained about having to actively refuse the, cards., Amex said Mr. Crittenden was not available for an interview, but Michael, O'Neill, a spokesman for the company, said the CFO was referring to the, reorient some of, thinking toward spend-based customers as opposed to a typical borrowing, Amex is not rethinking its approach to global network services, What we're talking about simply is the process you go, through, was saying it's kind of a learning process you go through, He used MBNA as an example of, The partnership's success led to it being extended after Bank of America, Corp. bought MBNA this year, Mr. O'Neill said.
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by H. Michael JaliliDiscover Financial Services LLC has signed deals with four banks to issue, its credit and prepaid cards., The Riverwoods, Ill., unit of Morgan Stanley said Tuesday that it signed, up two credit card issuers: Alliance Data Services Corp., a Dallas issuer, private-label cards for retailers, and First Bank and Trust of Brookings, S.D. Discover also signed up two prepaid issuers: West Suburban Bancorp, Inc., of Lombard, Ill., and Palm Desert National Bank in California., First Bank and Trust, a unit of Fishback Financial Corp., caters to the, underbanked. Trent Sorbe, the president of Fishback's marketing unit, said, (Another Discover partnership, with Morgan Beaumont Inc. of Bradenton, Fla., which sells prepaid cards, was announced last week.), Leslie Beyer, a spokeswoman for Discover, said it has been pursuing, partnerships with issuing banks since October *2004-, when the Supreme Court, refused to hear an appeal of a court decision throwing out the exclusionary, rules of Visa U.S.A. and MasterCard International., Visa and MasterCard had barred banks from issuing cards with brands other, than theirs. Since the rules were lifted, Metris Cos. Inc. (now part of, HSBC, Holdings PLC), General Electric Co.'s GE Consumer Finance, and CompuCredit, Corp. have begun issuing Discover cards., GE issues them at Wal-Mart and Sam's Club stores., In December, Discover and Exante Bank of Salt Lake City said they would, pilot-test a health-care account debit card., Joe Hurley, Discover's vice president of network strategic development, said in a press release that the deals announced Tuesday exemplify his, Ms. Beyer said the deals had been reached at different times, but she, could not provide the timeframe by press time., In an e-mail, she wrote that last year's acquisition of Pulse EFT, Association has enabled Discover to enter the rapidly growing debit market., more than doubles Discover Financial Services' transaction volume, and number of cards in the U.S. marketplace, forming what we believe is a, solid platform for growth and providing us with a gateway to more than, 4,200, she wrote., Last year Discover reached an agreement that allows Discover network, cards to be accepted at China UnionPay automated teller machines and point, sale terminals in China. The deal also allows China UnionPay cards to be, accepted on the Pulse network in the United States.
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by Jody ShennEducational Loan Servicing LLC of Rockville, is set to announce, today that it plans to begin providing private-label origination, outsourcing, for the fast-growing private student lending market., To help get that business up and running by the fall, American, International Group Inc.'s United Guaranty Corp. has made an investment in, the servicer, which does business as Campus Partners., United Guaranty, which has not revealed the size of the investment, based in Greensboro, N.C. It is best known as a mortgage insurer but began, insuring private student loans in 2003., A widening gap in recent years between education costs and consumer, savings and federal aid has created explosive growth in private student, lending. Observers expect that growth to continue., We think with the growth in the marketplace ... there is clearly room, said Michael Carey, Campus Partners' president., He would not provide much detail on his company's origination-service, ambitions, except to say that, at least in the short term, it does not, expect, to get to be as big as First Marblehead Corp., the leader in the field., for outsourcing, platform,, N.C., where its servicing operations are based., The servicer began in 1964 as Wachovia Services, a division of Wachovia, Bank, and began servicing student loans the following year., For many years it was part of Academic Management Services Inc., which, was one of the top 20 originators of federal student loans when SLM Corp., (better known as Sallie Mae) acquired it in 2003., Regulations that prohibit schools from using a billing servicer and a, collection agency owned by the same company led Sallie to sell the, servicing, business to the privately held JPT Partners LLC, Campus Partners' current, parent, in early 2004., Campus Partners says about 500 clients use it to service about 600, loans that are not federally insured. According to a press release, scheduled, turnkey outsourcing solution for, including credit underwriting, insurance, loan, origination, funding, and loan servicing. It would work with lenders, marketing partners, and schools., Mr. Carey said it expects to securitize most of the assets and hold, residuals, but it would also offer to let clients acquire them., Its executive team includes a number of veterans of the student lending, business, Mr. Carey said. His brother, Paul Carey, the chief executive of, Campus Partners, is a former executive vice president at Sallie, where, Michael Carey worked for 17 years., During the 2004-05 school year the volume of private loans rose 32% from, a year earlier, to $13.8 billion, according to the College Board, a New, York, nonprofit that offers college admissions, guidance, assessment, financial, aid services. Such loans grew faster than any other form of student aid., In its annual report, First Marblehead said it was aware of two principal, competitors: Sallie and Servus Financial Corp., a company bought by Wells, Fargo & Co. in 2000 that does high-profile work as the disburser of, financing, for Microsoft Corp.'s training courses., First Marblehead's biggest clients are JPMorgan Chase & Co., Bank of, America Corp., PNC Financial Services Group Inc., and Royal Bank of, Scotland, Group PLC's Charter One Bank. During its fiscal third quarter, which ended, March 31, the Boston company facilitated the origination of $706 million of, private student loans available for securitization, or 45% more than it, did a, year earlier., Thomas K. Brown, the founder and chairman of Second Curve Capital LLC, has been a big proponent of the idea that banks and other lenders are, unlikely to develop on their own the skill set for originating private, student loans, even if they already make federal student loans., Last month in an article on his investment firm's Web site, Mr. Brown, touted a deal in which First Marblehead (which Second Curve Capital owns, shares of) will provide direct-to-consumer private student loans for, KeyCorp,, which generally provides private student loans in-house. The deal is more, evidence of the value the outsourcer provides to lenders, he wrote., Campus Partners' affiliation with United Guaranty, which has insurance in, force on about $4 billion of private student loans, would mirror First, Marblehead's partnership with the Education Resources Institute, nonprofit, guarantor of such loans., Alan Atkins, the president and group executive of United Guaranty's, domestic consumer group, said the insurer saw an opportunity to participate, one of the fastest-growing, consumer, as well as to augment its sales of such insurance., terms of outsourcing packaged with insurance, Mr. Atkins said. Existing, options involve relying on protection from guarantors that may not be as, United Guaranty carries double-A or equivalent ratings from all the major, rating agencies -- compared to Education Resources' counterparty rating of, Baa3 (the lowest investment grade rating) from Moody's Investors Service, Inc., and its A-plus insurer financial strength rating from Fitch Inc., Bill Davidson, the chief financial officer at the Education Resources, Institute, or TERI, in a brief interview pointed out its long history and, strong market share., As far as I'm concerned there is no competitive advantage from any, weakness TERI might have because TERI doesn't have any weakness, Education Finance Partners Inc., a San Francisco private student lender, that was founded in 2003 and has backing from Morgan Stanley, does all of, work in-house and does not offer its services to others., Tamera Briones, Education Finance Partners' CEO, said that over time she, created by the market's growth to lead to margin, compression that will eventually make it difficult to be in the business, without handling all parts of it., However, that inevitable maturing of the industry may be as many as 10, What I can assure you is, the marketplace we, Mr. Carey said he believes many originators will continue to lack the, scale to want to do the business on their own. He and Thomas Green, Campus, Partners' vice chairman, also own part of Student Trust Inc., a Washington, provider of federal consolidation loans., A spokesman for Campus Partners said Student Trust does not plan to use, his firm's new services to get into private student lending.
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by Paul DavisBB&T Corp. gave investors a peek at its Florida strategy last week when, chairman John A. Allison said it could be another decade before BB&T, becomes, one of the state's top five banking companies., Analysts said Mr. Allison, who is also the Winston-Salem, N.C., company's, president and chief executive, was telegraphing to Wall Street that he, probably will not pursue a large acquisition in Florida., BB&T has assets of $110 billion and is Florida 18th-largest bank by, deposits, with a 0.91% share, according to June 2005 Federal Deposit, Insurance Corp. data. BB&T says it ranks 11th in Florida, though its data, does not include thrifts., Bank of America and Wachovia, both of Charlotte, and Atlanta's SunTrust, Banks Inc. are first, second, and third in deposits in Florida. At his, company's annual meeting on April 25, will, a tremendous, BB&T is actively opening branches in the state, and, analysts, said Mr. Allison is likely to look for smaller acquisitions there., BB&T has been a serial acquirer in recent years, in keeping with Mr., Allison's long-stated goal that BB&T be among the five largest banks in any, state in which it operates. Mr. Allison said that is necessary in order to, in the U.S. banking industry., (BB&T is among the top five in five of its nine states: Kentucky, North, Carolina, South Carolina, Virginia, and West Virginia. Besides Florida, lacks such scale in Georgia, Maryland, and Tennessee.), Mr. Allison used the oligopoly rationale to defend the expensive *2003-, purchase of First Virginia Banks Inc., which was slammed by Wall Street., After buying First Virginia, BB&T imposed a bank-acquisition ban on itself., That ended in December of last year, when BB&T announced it was buying, Main Street Banks Inc. of Atlanta, and in January it announced it was, buying, First Citizens Bancorp of Cleveland, Tenn. Both deals are expected to close, this quarter., Mr. Allison said at last week's meeting that buying Main Street would, make BB&T the fifth-largest bank in Georgia and that buying First Citizens, would make it the fourth-largest bank in eastern Tennessee. But he added, that, in Tennessee, where, BB&T, ranks seventh with 1.3% market share., Kevin Fitzsimmons, an analyst at Sandler O'Neill & Partners LP, said Mr., Allison's comments last week were meant to assure investors that a large, deal, He's just being realistic that he'll have to cobble, together, Mr. Fitzsimmons said in an interview last week., Richard Bove at Punk, knows that people, want to, hear, But Mr. Bove added that BB&T will probably emerge as a top-five bank in, Florida much sooner than 10 years because a difficult operating environment, will have no, problem, This is a tough market to do M&A, frankly., The prices ... are so high that it's very hard for us to make mergers and, acquisitions work. We're still looking to buy community banks ... but we'll, In the meantime BB&T is growing in Florida through aggressive branch, building, it plans to open 20 new branches a year there. Last year it, opened, 50 branches across all its markets, and Mr. Allison said during last week's, meeting that it was on pace to open 60 this year. Florida's fifth-largest, bank, AmSouth Bancorp of Birmingham, Ala., plans to build 54 branches in, Florida in 2006., On April 20, BB&T reported first-quarter net income of $431.5 million, 9% from a year earlier. It benefited from an effort to boost deposits, which, was spurred by a study it commissioned last year that encouraged it to be, more aggressive. It added 49, 000 net transaction accounts in the first, quarter, and average deposits rose 10%, to $74.2 billion., trust,, wealth, said., The company's stronger-than-expected earnings won it an upgrade Monday, from Jon Balkind, an analyst at Swiss Reinsurance Co.'s Fox-Pitt, Kelton, Inc., from, relative stability in the margin and solid, are beginning to bear
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by Paul Davis and Laurie KulikowskiInvestors have gotten a look at the kind of banking company Capital One, Financial Corp. is becoming., On Thursday the McLean, financial services company reported, first-quarter earnings that included results for Hibernia Corp., the New, Orleans banking company it acquired in November. A day later North Fork, Bancorp. Inc., the Melville, N.Y., company Capital One is buying, reported, its earnings., Neither company's results blew away last year's numbers, but analysts, said North Fork's results did not present any nasty surprises. That fact, viewed as a positive development by analysts who had thought deteriorating, fundamentals might have prompted its sale., Though Hibernia's net income fell from a year earlier, the company showed, a huge improvement from the fourth quarter., Capital One is putting its name on Hibernia branches today. In a, supplement included with its first-quarter earnings report, it said that, earnings from its banking operations rose 155% from Hibernia's earnings for, the fourth quarter but fell 9% from its earnings a year earlier, to $78.2, million., During the quarter Capital One moved Hibernia's auto loans out of its, banking operations and replaced them with its online deposits. Those, changes,, along with other adjustments, left its banking business with $43 million of, earnings., On Friday, North Fork said its first-quarter earnings fell 19% from a, year earlier but were flat from the fourth quarter, at $210 million, because, of the flattened yield curve and a balance-sheet repositioning., Last month Capital One agreed to buy the $57 billion-asset North Fork for, $14.6 billion. The deal is expected to close in the fourth quarter., Many of North Fork's figures fell from a year earlier, but there were, bright spots. Commercial loans rose 31%, to $11.7 billion, and made up 34%, the loan portfolio, 6 percentage points higher than a year earlier., Deposits, rose 3.2% in the same time frame and 3% from the fourth quarter, to $37.7, billion., Expenses rose 4.7% from a year earlier but fell 6% from the fourth, quarter, to $258.2 million. Noninterest income fell 8.1% from a year, earlier,, to $168 million, and mortgage banking income fell 13.5%, to $96 million., Mortgage originations at North Fork's GreenPoint Mortgage fell 22%, to $7.8, billion., John A. Kanas, North Fork's chairman, president, and chief executive, precisely what we, Though the margin shrank 6 basis points from the fourth quarter, and 23 basis points from a year earlier, to 3.56%, quite, Mark Fitzgibbon, the director of research at Sandler O'Neill & Partners, North Fork. After the results were released, he upgraded the company's, shares, because of their price and Capital One's acquisition, plans., A lot of people thought ... [Mr. Kanas] sold the bank because earnings, However, Regional banks are having a tough, time, for the most part. That can't be expected to change as long as interest, rates, Capital One found some positives in its banking operations, which are, largely in areas that were hit by Hurricane Katrina. The $89 billion-asset, company added $500 million of deposits in the first quarter. About $4.5, billion of deposits have been added since Katrina hit the Gulf Coast on, Aug., 29, and a fourth of them do not bear interest., Richard Fairbank, Capital One's chairman and CEO, cautioned during, of deposits, could run off as customers deploy funds for rebuilding. He said that the, loan, portfolio for its banking operations shrank as a result of post-Katrina, balance declines., According to financial supplements, that portfolio shrank 2% from the, fourth quarter but rose 2% from a year earlier, to $16.1 billion., The first-quarter net chargeoff rate in Capital One's banking operations, cautious underwriting, Edwin Groshans, an analyst at Swiss Reinsurance Co.'s Fox-Pitt, Kelton, Inc., said in an interview that he was encouraged by the low chargeoff, rate., in Hibernia, markets., So far the deposits appear to still be growing. That's a pretty big, Mr. Fairbank gave more details on how Capital One is handling Hibernia., It has moved a number of banking operations to Dallas to keep the bank, running if another natural disaster hit the Gulf Coast. It plans to convert, Hibernia's systems in June., He made few projections about North Fork, would maintain the full-year earnings guidance it gave before it announced, when, analyst suggested an accelerated conversion to capitalize on any disruption, from JPMorgan Chase & Co.'s deal to buy Bank of New York Co.'s branch, network., The conventional wisdom in the banking business is that anytime big, banks buy smaller ones, all the other players lick their chops, have got to remind ourselves that ... community banks are licking their, chops, Capital One's first-quarter earnings rose 215% from the fourth quarter, and 74% from a year earlier, to $883.3 million, because of improved credit, quality, as well as a pair of special items that added $119 million of, gains., Mr. Fairbank was generally positive about his company's overall credit, quality. Net chargeoffs fell 33% from the fourth quarter and 9% from a year, earlier, to $301 million. Its loan-loss provision shrank 70% from the, fourth, quarter and 34% from a year earlier, to $170.3 million., There is so much noise in the credit environment these days ... but it, does look pretty darn strong. We don't see any red flags
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by Daniel WolfeChallenge questions, the prompts that many banks and other companies use, to authenticate customers' identity online, are themselves giving rise to a, new generation of customer service challenge., The questions, the classic example of which is the request for a mother's, maiden name, have evolved over time, in part because widespread use has, diluted the security value of the most common ones., Many banks now use software that routinely asks such questions online, and in the process they are learning that there often is a fine line, between, questions that screen effectively and those likely to inconvenience, legitimate customers. An example of the latter might rely on a piece of, information with a short shelf life., Part two of the challenge: dealing with the frustrated customer who finds, online access to an account blocked when unable to answer the security, query., Sam Tuohey, the chief technology officer and the vice president for, technology and e-commerce for Stanford Federal Credit Union of Palo Alto, Calif., said its systems sometimes ask people for the last four digits of, their home or cell phone number, and some customers were concerned they, would, be barred from their accounts because their phone numbers have changed., Stanford Federal uses authentication software that RSA Security Inc., acquired when it purchased PassMark Security Inc. of Menlo Park., Calif., April. The software evaluates customers' computers when they log in, verify that they are using a recognized system. If they are not, they must, authenticate themselves by answering challenge questions., When people cannot answer the questions, their first response is usually, to call the credit union, but customer service representatives initially, could not help, because the software did not let them update the answers on, file, Mr. Tuohey said. Eventually, Stanford Federal asked PassMark to, change, its software to enable the customer service staff to do so., Amir Orad, the vice president of marketing with RSA's consumer solutions, division (which includes the PassMark product), said that the Bedford, Mass.,, vendor works with financial companies to develop questions that customers, use, and that great care must go into the process., One rule RSA developed over time is to avoid questions for which the, answer may change. Questions whose answers might seem set in stone, sometimes, are not., is not a good, Some customers will change their mind in a few, Mr. Tuohey said that in many cases, the problem is that the answer can, change over time -- as his boss learned the hard way., John R. Davis, Stanford Federal's chief executive, was once trying to log, knew her password,, but he, The question was, 'What is your favorite movie?' and he thought it was 'Casablanca.' It, turned, It was, Though Mr. Davis knew his wife was a longtime fan of the Humphrey Bogart, film, she had seen the bicycle-racing one not long before she was asked to, provide a challenge question for the credit union's authentication, software,, temporarily, as her favorite, movie., She has since changed her answer on the credit union's systems, Tuohey said., Stanford Federal also encourages customers to select answers that do not, For, instance you can pick 'What are the, last, type your, as the answer., Doing so could improve security but would also make it more likely that, the customer would forget the answer, Mr. Tuohey said., About 25, 000 Stanford members have used its online banking site in the, past month, and have logged in 200, 000 times. In about 280 cases, the user, had to answer a question, and 40 to 50 times the question was answered, incorrectly., Customers have three chances to answer a question, and Mr. Tuohey said he, could not say whether these people could not access their accounts because, an incorrect answer. However, he did say the credit union has received few, complaints from people who could not answer their question., Mr. Orad said that another complication is that many effective questions, some customers don't feel comfortable answering, The most secure questions are also the most personal, software once included a question asking customers for their Social, Security, number, but today many customers refuse to provide this, fearing identity, theft., you don't want to ask the same question everyone's, Mr. Orad said, asking for a mother's maiden name is now so common, has lost its effectiveness., Victor Smilgys, assistant vice president of e-commerce at Technology, Credit Union of San Jose, stay away, from questions with answers that may be limited to only a few popular, For example, if the system asks for someone's favorite sport, many, Technology Credit Union began using PassMark's software in November, Mr. Smilgys said that PassMark helped it craft its challenge questions. The, version the credit union is using also permits people to change their own, questions and answers within an online banking session., The credit union has programmed the software to recognize some common, abbreviations for street names, but not all of them, and it recommends that, people avoid all abbreviations., One feature Mr. Smilgys would like to see is permitting customers to, write their own challenge questions, he has discussed the idea with the, RSA owns not only the PassMark product but also those developed by Cyota, Inc., a New York company RSA bought in December. Mr. Orad said that today, between 0.25% and 0.5% of its authentication products' users cannot answer, the challenge question presented to them. The failure rate was 1.1% to 2.3%, when the products were introduced., When RSA bought PassMark, it learned that the timing of the questions can, be critical. The PassMark product presents the challenge when people log, when customers expect to undergo authentication and are more willing to, read, the instructions carefully, Mr. Orad said., Cyota's software asks questions when people try to initiate risky, transactions -- after they have logged in to the Web site. Mr. Orad said, people can be impatient and are less focused on authentication once they, have, moved past that process, and asking challenge questions later in an online, banking session can be off-putting., In those cases, the questions must be as succinct as possible, or people, George Tubin, a senior analyst at TowerGroup Inc., a Needham, Mass., unit, of MasterCard International, said banks should also pay attention to the, technology they use to evaluate the answers. A system designed to use, fuzzy, is better at interpreting human answers than systems that accept, only, a single answer., For example, you went to St. Mary's, how you spell the word 'Saint' could be any one of, However, Avivah Litan, a vice president and research director at the, Stamford, Conn., market research company Gartner Inc., said that challenge, questions may not provide enough security. Simplifying questions is another, if they're easy, Most products that use challenge questions do so only when there is more, when you need the
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by Jody ShennFreddie Mac's latest set of delays in its financial reporting reflects an, apparent shift of priorities, from current reporting to remediation work., The government-sponsored enterprise said Friday that it would not meet, its self-imposed March 31 deadline for releasing full-year 2005 results., does it plan to return to timely reporting of its capital position to its, regulator on a basis compliant with GAAP by next month, as it had, previously, expected., The capital-reporting delay, the more important of the two, surprised, some analysts. Before Friday the GSE had appeared to be on the cusp of, getting its quarterly earnings reports back to a normal schedule. Though it, had not offered a firm schedule for doing so, most observers assumed a, full-year release meant timely earnings reporting from then on., But Martin F. Baumann, Freddie's chief financial officer, said Friday in, infrastructure to the point where it can, support timely, reliable quarterly reporting continues to be an enormously, Edwin Groshans, an analyst at Swiss Reinsurance Co.'s Fox-Pitt, Kelton, Inc., said Freddie told him Friday that it has stepped back from quarterly, reporting because the staff involved with preparing it, at times using, manual, steps, is also working on accounting and controls systems., Ensuring that those systems are in order, and that needed policy updates, For the longer term, this is the, right, Even if Freddie had focused too much in the recent past on putting out, results rather than repairing systems, there were good reasons for doing, The Street doesn't want to have radio silence for three, Full-year results will not be out until May, and even those will not, include an audited annual report. However, Freddie will discuss preliminary, results and future timelines on a March 30 conference call. It said its, goal, now is to start filing GAAP-compliant capital reports with the Office of, Federal Housing Enterprise Oversight and disclosing quarterly earnings in a, timely manner by yearend., Freddie also said it will begin registering its stock with the SEC after, it started putting out timely quarterly reports. It was expected to start, registering next quarter., significant improvement in its method for determining the estimated fair, It will make, Freddie has been collecting thoughts from Wall Street firms on similar, financial instruments that it is feeding into its models for valuing the, essentially untraded assets and obligations, after using less third-party, information in the models previously. It said it does not expect the change, to affect any previously released audited financial statements. (It had, previously revised the modeling for first-half 2005 results.), To be fair, executives have repeatedly warned Freddie's timelines could, prove overly optimistic. Eugene McQuade, the GSE's president, cautioned at, We have an awful lot of work to do, and, Freddie was steadily moving closer to regular earnings releases until a, computer programming error it uncovered in preparing third-quarter results, required a $220 million reduction of past results. Firm third-quarter, results, have yet to be released. Freddie entered a reporting black hole because of, accounting scandal that broke in the middle of 2003., Naturally, some saw Friday's announcement as more ammunition for GSE, critics in policymaking circles., can bolster support for the strict, reformists, who argue the GSEs never really knew what risks they actually, said Robert Lacoursiere, an analyst at Banc of America Securities., However, Fannie Mae has been working on a multiyear restatement since late 2004., In November it said it does not expect to issue the restatement, expected, erase about $10.8 billion of past profits, before July., the restatement, a Fannie spokeswoman said.
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by Daniel WolfeThe fact that PayPal Inc. has more than 100 million registered users, worldwide was not enough to persuade Cingular Wireless LLC to cooperate, with, the eBay Inc. unit when it introduced its mobile phone payments service in, April., However, the Atlanta phone carrier has agreed to work with Obopay Inc., year-old Redwood City, Calif., person-to-person payment company that is, still, testing its service., The reason? Obopay offered the carrier a piece of the pie., said Howard Gefen,, executive vice president for marketing and business development at Obopay., the more people that, Both mobile payment services can work with any phone and any carrier., However, the carriers can make a service easy or hard to use on their, phones,, so they have some heavy leverage. Vendors have long complained about the, difficulty of negotiating with them for any service that would require, changes to software or extra charges on consumers' phone bills., Analysts said the decision to work with Obopay indicates that Cingular, sees payments not only as a useful service to offer customers, but also as, important potential source of revenue., Kevin Dulsky, the senior director and general manager of mobile for, PayPal, said its value proposition for carriers centers around the, potential, increase in text messages. PayPal Mobile payments are initiated by text, messages, and carriers charge their customers for sending the messages., Every carrier in the United States, Canada, and the United Kingdom, supports PayPal's Text to Buy service, except Cingular, In PayPal's system, products and services are assigned short numeric, codes, and customers send a text message to the number to make a purchase., The goods are shipped to the customer's address registered with PayPal, the charges are deducted from their PayPal account., Cingular won't transmit messages to those numbers, but customers can make, purchases by calling PayPal., Both the text and voice versions of the service are free for customers, and PayPal charges merchants for each transaction., Mr. Dulsky said that PayPal is negotiating with Cingular to support Text, to Buy, and that the carrier is missing out on revenue by not supporting, service., At the heart of any negotiation, it comes down to things like money and, are looking at it as a strategic, partnership, or a strategic relationship, and Cingular is not any different in that, Obopay currently offers person-to-person payments that are authorized, with a mobile phone and debited from a prepaid account. It charges users 10, cents to send or request money., Anyone can initiate payments with text messages, but Cingular customers, can download custom software that links the process to their phones', address, books, to makes the service much easier to use. Mr. Gefen said that his, company will let people start initiating transactions through phones', mobile, Web browsers within 30 days, though the service would not be linked to the, phones' address books., Only Cingular customers can download the software, though Mr. Gefen said, he expects to announce a deal with a second carrier within 60 days., He would not say how much revenue it shares with Cingular, nor whether, its deal with Cingular permits the carrier to support any other company's, mobile payment system., In March, Obopay announced it had received $10 million of funding from, several venture capital companies, including Redpoint Ventures, Onset, Ventures, and Richmond Management. In addition to the mobile service, offers a MasterCard-branded prepaid debit card, issued by First Premier, Bank, of Sioux Falls, S.D., Obopay's management team includes executive that have worked previously, at Visa International, First Data Corp., Norwest Bank, and Microsoft Corp., Mark Siegel, a Cingular spokesman, would not say whether revenue-sharing, was a factor in the company's decision to support Obopay instead of PayPal., However, he did say that Cingular is keen on using phones to make payments, and he noted that it is testing such a system now at Atlanta's Philips, Arena., Cingular, JPMorgan Chase & Co., and Visa U.S.A. began testing a payment, system for the arena in January. Basketball and hockey fans were given, phones, with contactless payment card chips that can be used to charge purchases to, Chase Visa cards at the arena's concession stands., When the deal was announced in December, JPMorgan Chase said that an, important consideration was making the system profitable for Cingular, because carriers are unlikely to support payment systems that do not offer, them a return. In this test, the phones can also be used to purchase, ringtones, games, and videos from Cingular., But so far Cingular has barely tested the waters for person-to-business, phone payment services outside its network, such as Text to Buy., We are in the very, very early stages of thinking of that particular, space and whether or not it can bear fruit on a bigger scale, Mr. Siegel, Aaron McPherson, a research manager for payments at Financial Insights, Inc., a Framingham, Mass., unit of International Data Group Inc., said, It's, very difficult to get the carriers to cooperate because the carriers want, maintain control over payment systems on their devices as much as they, PayPal has 105 million accounts for its online payment service, and 29.2, million were used to conduct transactions in the first quarter, but Mr., McPherson said far fewer people use its mobile payment service. (Mr. Dulsky, would not provide specific volume figures.), To get more leverage in negotiations with carriers, a payment service, provider needs enough people using its system to prove that the carrier, would, benefit from supporting the service, it's too early in, They don't have enough people using, Such a service would need at least a million regular users to be in this, Dan Schatt, a senior analyst for the Boston market research firm Celent, classic tension between financial service, Clearly, it is in PayPal's best interests to persuade Cingular to support, Text to Buy. Without the carrier's sanction, its customers cannot use, PayPal's, more convenient payment method., And Cingular's reluctance to participate in the PayPal system is, Either Cingular is planning something, for more money.
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by Christopher WoodMIDWEST, UMB Financial Corp., a $7.7 billion-asset, multibank holding company in, Kansas City, has hired Clyde Wendel as its managing director of, private, banking and the president of its UMB Asset Management., He has also been nominated as a vice chairman of the $6.5 billion-asset, UMB Bank, one of five banking units that share the UMB name., Mr. Wendel was the Kansas City president for Bank of America Corp.'s, private bank. He has 36 years of banking and financial services experience., Wintrust Financial Corp., an $8.5 billion-asset, 15-bank holding company, in Lake Forest, Ill., has hired Thomas P. Zidar as an executive vice, president and its wealth management market head., He has also been named the chairman of three nonbanking units of, Wintrust: Wayne Hummer Investments LLC, Wayne Hummer Asset Management Co., and Wayne Hummer Trust Co., Mr. Zidar was an executive vice president in charge of five business, units in the personal financial services group at LaSalle Bank. He had also, been the chairman of its financial services group. He had worked at LaSalle, and its parent company, ABN Amro Holding NV, since 1997., MIDDLE ATLANTIC, VSB Bancorp Inc. of Staten Island, N.Y., has named Raffaele Branca to, succeed Merton Corn as the president and chief executive officer of the, company and its $220 million-asset Victory State Bank when Mr. Corn retires, at the end of next year., Mr. Branca, an executive vice president, has been the chief financial, officer and the chief operating officer of the company and the bank for the, past nine years., Before that he had been a vice president of finance and investments at, River Bank America. Earlier he had held the same job at Hamilton Bancorp, Inc., Bay National Corp. of Baltimore has hired Richard C. Springer as an, executive vice president and the head of commercial and private banking at, its $217 million-asset Bay National Bank., Mr. Springer was a senior vice president and the Baltimore area executive, for Branch Banking and Trust Co. He has 25 years of commercial banking, experience., WEST, First Bank of Beverly Hills of Calabasas, Calif., has promoted Annette J., Vecchio to chief credit officer and made her an executive vice president., Ms. Vecchio, who joined the $1.4 billion-asset unit of Beverly Hills, Bancorp Inc. in *1985-, was a portfolio manager and a senior vice president., North Bay Bancorp of Napa, Calif., said Michael Wengel would become its, chief financial officer June 19., He will succeed Patrick Phelan, who is leaving the company but will, remain for a month to help with the transition., Mr. Wengel was a senior manager at KPMG LLP and had been involved with, the yearend 2004 and 2005 independent financial audits it conducted for, North, Bay., His new company owns the $611 million-asset Vintage Bank., Silver State Bancorp of Henderson, Nev., has hired Kirk Viau as its chief, risk officer and a senior vice president., Mr. Viau joined the company, which owns the $872 million-asset Silver, State Bank, from the Federal Deposit Insurance Corp., where he had been a, senior bank examiner., At the FDIC he led safety-and-soundness examinations for various, financial institution in Arizona and Nevada.
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by David Breitkopf and Isabelle LindenmayerVisa U.S.A. will ask its members to vote Friday on several significant, changes to its corporate structure, including the addition of four, independent board members, some of whom could take control of its, interchange, rate policies., The association plans to eventually add yet another four independent, directors, at least three of the eight would take over the responsibility, interchange-fee policy from Visa's member banks., Visa first sketched out the plan in November, the details are in an April, proxy that American Banker obtained. The goal is largely to protect Visa, from, the slew of interchange-related merchant lawsuits that have been brought, against it over the past year., The San Francisco card association, on whose board two seats are vacant, proposes to turn over them and two more to nonmember directors this month., One of the latter two is currently held by Tim Arnoult, the head of, global treasury services at Bank of America Corp. Mr. Arnoult is retiring, from B of A this month., The proposal would leave his company, one of the nation's top card, issuers, without a seat on Visa's board or MasterCard International's., Kenneth D. Lewis, B of A's chairman, chief executive, and president, quoted in Wednesday's Wall Street Journal as being interested in the, possibility of forming a B of A-owned network to carry card transactions., One spokesman for B of A confirmed the accuracy of the report. And a, spokeswoman for the company said there was no connection between the story, and the Visa proposal., Visa answered an inquiry about Mr. Lewis' comments with an e-mailed, Our mission is to deliver an exceptional value to all financial, institutions, large and small, and our long-standing partnership with Bank, The four independent nominees proposed in Visa's proxy are Philip D., DeFeo, 60, a managing partner of Litos Capital Partners, Linda Baker Keene,, a retired marketing executive who until December was the executive vice, president of marketing with Scholastic Inc., John A. Swainson, 51, who is, president and CEO of CA Inc. (formerly Computer Associates International), Jon C. Madonna, the former chairman and chief executive of Digitalthink, Inc., Mr. Madonna is also a member of the board of Albertson's Inc., the large, supermarket chain that is among the plaintiffs in a consolidated, interchange-related suit against Visa and MasterCard., Paul Cohen, a Visa spokesman, said that the four independent nominees, to Visa., (Under the proposal, the independent directors could not have had a, with Visa or its members for the past five years, relevant business, academic, Visa is interviewing candidates to fill the four other seats and would, Mr. Cohen said., If the proxy is approved, the number of bank-member directors on Visa's, board would temporarily drop to 11. The board would still include the two, Visa executives who are now members -- John Philip Coghlan, president and, and Christopher Rodriques, the president and CEO of Visa International, -- but they would be unable to vote., Ultimately the board would have 17 directors: eight independents, seven, from member banks, and two Visa executives., Under the proposal, Visa would allow one member bank with annual card, sales of less than $1 billon to fill one of the member-bank directorships., Mr. Cohen said that bank has not been chosen., Visa's restructuring would also include the creation of a committee made, up of three or more independent directors, who would determine interchange, and reimbursement fee policies as well as member transaction and service, fees. That committee would also make decisions about issuer and acquirer, partnership programs., (Member banks would continue to make governance and hiring decisions, determine membership eligibility requirements, and oversee the audit and, risk, committee.), The rival MasterCard, of Purchase, N.Y., made some similar changes in, turning itself into a quasi-public entity. It plans an initial public, offering some time this year. (MasterCard's proposal for its IPO outlines, further changes: a new governance structure in which its member banks would, have a minority of its equity rights and lesser voting rights, as well as, independent board of directors.), Meanwhile dozens of interchange-related lawsuits that have been filed, against the two companies moved one step forward this week: They were, consolidated into a single suit., The amended suit, headed for what is likely to be a lengthy trip through, the judicial process, was filed in U.S. District Court for the Eastern, District of New York. It includes at least one significant change from the, many separate suits that had been filed: Beyond suing Visa, MasterCard, some of their issuing banks over credit card interchange fees, plaintiffs, have added debit cards fees to the mix., The consolidated suit also provides more detail on the plaintiffs' claim, that the card associations have prevented merchants from steering customers, to lower-cost payment options, according to K. Craig Wildfang, the lead, plaintiff's attorney on the case., Legal experts expect the associations to file motions seeking dismissal., An argument related to the motions is slated for late August, said Mr., Wildfang, a partner at Robins, Kaplan, Miller & Ciresi LLP. In the, meantime,, however, the discovery period, which will begin May 1, will be allowed to
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by Katie Kuehner-HebertWith its deal for GBC Bancorp Inc. in suburban Atlanta, First Charter, Corp. of Charlotte is taking a big step toward building a regional, franchise, stretching from Virginia to Georgia., The $4.3 billion-asset First Charter has agreed to pay $102 million in, cash and stock for GBC, which is based in Lawrenceville, Ga. It would be, First Charter's first acquisition outside its home state, its first bank, acquisition in six years, and the first under president and chief executive, Robert E. James Jr., who took the helm in July 2005., Mr. James' first priority was to make First Charter more profitable by, restructuring the balance sheet and cutting expenses. Now, with the company, coming off one of its best quarters in years, Mr. James said it is ready to, start expanding -- through acquisitions or branching or both., which has assets of $418 million, is the parent of the 9-year-old, Gwinnett Banking Co. Population in its principal market, Gwinnett County, projected to increase 23.5% by 2010 -- against 11.3% for Georgia as a whole, and 6.3% for the nation., Atlanta is a great market because of its sheer size, and because it's, one of the fastest-growing markets in the entire U.S., Mr. James said in, interview Friday. The deal for GBC was announced late Thursday., Gwinnett Banking would be merged into First Charter Bank but retain its, name and management, including Larry Key, its president and CEO., The deal is expected to close in the fourth quarter, on completing it, First Charter would have assets of $4.7 billion and 60 branches., Jefferson Harralson, an analyst in Atlanta for Keefe, Bruyette & Woods, Inc., said the deal complements the new management team's focus on, upgrading, the company's performance., After Lawrence Kimbrough retired in July 2005 as president and CEO of the, holding company, Mr. James, First Charter Bank's president and CEO at the, time, assumed the top positions at the holding company as well. Four top, managers were replaced, including the chief financial officer and the chief, risk officer., First Charter was not a poor performer, but in 2003 it hit a bumpy patch, with credit quality problems and a regulatory order to tighten its Bank, Secrecy Act procedures., However, when Mr. James and his new team came onboard, they started, restructuring the balance sheet by reducing the amount of securities and, borrowings and slashing expenses by consolidating some insurance offices, switching to lower-cost vendors., This new management team is more committed to improving ROE and, The management team before it did, First Charter's goal is to have a return on equity of at least 15% within, the next several years, Mr. James said. Its first-quarter ROE was 14.12%, versus 13.21% for last year's first quarter. Its 1.14% return on assets in, the quarter was its highest since the third quarter of 2002., Mr. Harralson said he was surprised First Charter skipped over South, Carolina to make its first deal outside North Carolina., sense considering that the price is reasonable -- 2.6 times tangible book, 14.4 times trailing earnings -- and that GBC is one of the region's top, Small, Business Administration lenders and had an ROE of 19.59% on March 31., Moreover, 72% of GBC's loans are construction and commercial real estate, loans. That, said John A. Pandtle, a senior vice president at Raymond, James &, should accelerate the repositioning of, First Charter's balance sheet away from securities, and more toward, Christopher Marinac, an analyst at FIG Partners LLC in Atlanta, said, First Charter should not have much trouble offsetting the certificates of, deposit on GBC's books by opening more branches in Atlanta and getting more, demand deposits., First Charter's stock fell 1.3% Friday, to $24.24. GBC's rose 16.7%, $45.50.
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by Isabelle LindenmayerWashington, The House Energy and Commerce Committee passed a data security bill, Wednesday that would give the Federal Trade Commission oversight of all, companies that handle sensitive consumer information, rather than giving it, to banking and thrift regulators., The bill is at odds with one the House Financial Services Committee, passed this month that would give banking regulators the enforcement, authority., The House Commerce bill also has a lower threshold for when customers, must be notified of a breach, and it would let consumers correct customer, files and give enforcement authority to state attorneys general -- two, provisions the financial services industry opposes., Other committees have introduced their own bills or are expected to do, so. The Republican House leaders must decide which bill should win out, they should be combined., The Council of Better Business Bureaus, along with Visa U.S.A., Equifax, Inc., International Business Machines Corp., Verizon Communications Inc., eBay Inc., and its PayPal Inc., launched an effort on Monday to help small, businesses beef up their data security procedures., At a press conference in Washington for the new program, Lydia Parnes, the director of the FTC's bureau of consumer protection, said her agency, would bring enforcement actions against small businesses that do not have, adequate policies and procedures to protect consumer data., Scams, Three Florida banks, Premier Bank, Wakulla Bank, and Capital City Bank, have had their Web sites hacked in an attack that security experts say is, first of its kind., Hackers broke into servers run by the Internet service provider that runs, the three banks' sites, redirected the traffic to a bogus server, and stole, credit card and PIN numbers, along with other personal information on the, banks' customers., Though the scam affected fewer than 20 customers, the ability of, fraudsters to link a bogus server to a legitimate Web site is a troubling, development, Computerworld reported Wednesday., Fraudsters have been targeting large banks recently, but that could be, changing, as small ones can sometimes make easier targets, the magazine, reported., More traditional scammers are targeting soccer fans. Customers at a, number of Brazilian banks have received bogus e-mails claiming to be from, MasterCard International and offering free travel and tickets to this, summer's Fifa World Cup tournament in Germany. Clicking on the link to, claim, the prize downloads a keylogger to the user's computer., The scam has targeted customers of Banco Bradesco, Banco Itau, Unibanco, Banco Real, and Caixa, Computerworld reported Monday., People who put classified ads in The Washington Post have also fallen, victim to a crafty scam., A woman posing as a Post employee tricked them into turning over their, credit card numbers and ran up thousands of dollars in fraudulent charges, according to an indictment handed up Tuesday in the Superior Court of the, District of Columbia., Shante Buchanan allegedly called the advertisers claiming their credit, card numbers had not gone through and offering to run them again. Ms., Buchanan then used the card numbers or the advertisers' information to open, credit cards for herself and made purchases from December 2004 through, January of this year, the Post reported Thursday., At least 50 people fell for the scam, according to the Post, which said, it now gives advertisers a unique identification number to prevent such a, scam from occurring again., Even consumers Down Under are not safe from fraudsters., Fraudsters used a device to collect account information and PIN numbers, from a Bank of New Zealand automated teller machine and stole more than, $20,000 from customers' accounts., The New Zealand Herald, which reported the scheme Thursday, called it the, country's first case of skimming,, The bank has blocked 1, 300 credit and debit cards that were used at the, ATM this month, and other banks whose cards were used at the machine are, contacting their customers, the Herald reported., Westpac Banking Corp. said 115 cardholders were being contacted, National Australia Bank Ltd. said it blocked 100 cards as a result of the, scam., Arrests, The Secret Service said seven people were arrested Tuesday in Florida, New York, Illinois, Pennsylvania, California, and the District of Columbia, an investigation of online forums where credit card data and other stolen, consumer information is sold., The people face state and federal charges related to online identity, theft, credit card fraud, and access device fraud, The New York Times, reported Wednesday. Some of those arrested have been linked to the recent, breach of debit card numbers and personal identification numbers that, affected customers from at least eight large banking companies., In the last three months 21 people have been arrested in the United, States and Britain in the undercover operation, called Operation Rolling, Stone, the paper reported. The federal operation is the largest against the, online trading of sensitive personal information since Operation Firewall, broke a large trading ring in 2004., Technology, Biometric technology, including iris scanners, fingerprint readers, voice recognition devices, may become the norm in authenticating consumers, BusinessWeek reported this week., Solidus Networks Inc., the San Francisco biometrics company that does, business as Pay By Touch, is allowing supermarket customers to use their, fingertips to authorize payments, and it is working on a sensor that would, let customers use their fingers to make online purchases from their home, computer., A Fujitsu Ltd. device that is already widely used at ATMs in Japan uses, to identify a customer's palm. Fujitsu -- which,, according to Visa, is selling retailers software that can be reconfigured, store sensitive customer data, including PIN numbers -- expects to, introduce, the palm-recognition device in the United States in the second quarter., But it's not just financial institutions and stores that are using, biometrics. Elementary schools have installed iris scanners to keep out, intruders, BusinessWeek reported, and fingerprint readers have been, installed, on locks for home and office doors., Solidus says it hopes to expand its services to include health insurance, information., Security Watch is a weekly roundup of news and developments in data, security and their impact on financial services companies. E-mail comments, ideas, and suggestions to Isabelle.Lindenmayer
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by Tim MazzuccaPNC Financial Services Group Inc. has said it would be open to an, acquisition near one of its current markets, but a Goldman Sachs Group Inc., analyst said it's safe to assume the company will not be buying in, Washington., In a research note issued Wednesday, Lori Appelbaum wrote that its, organic expansion plans in the nation's capital are more than enough to, preclude it from doing deals in that region to build on the May *2005-, acquisition of Riggs National Corp., PNC has plenty of room to expand in D.C. and the surrounding suburbs, given PNC's 3% deposit market share and 60 branches in the market, while, Ms. Appelbaum wrote. She, reiterated, rating for the $93.3 billion-asset Pittsburgh company's, shares., As of June *2005-, PNC ranked 7th among retail banking companies in, Washington deposit share, according to the most recent available data from, the Federal Deposit Insurance Corp. Wachovia Corp. had the top share, (14.4%),, followed by Bank of America Corp. (11.2%), and SunTrust Banks Inc. (10.5%)., James E. Rohr, PNC's chairman and chief executive, said in February that, his company could pursue retail bank acquisitions where they made sense., His comments came the same month PNC signed a deal to combine BlackRock, Inc., the New York asset manager it mostly owns, with Merrill Lynch & Co.'s, asset management unit. PNC would record a gain of about $1.6 billion from, deal, which is expected to close next quarter. Its stake in BlackRock would, drop from 70% to 34%, and Merrill would get a 49.8% stake., When PNC issued its first-quarter earnings report April 20, Mr. Rohr gave, opportunities present themselves on the M&A front, let me reassure you that, In fact, we have, already passed on opportunities that you may have seen, because they simply, PNC has branches in Pennsylvania, New Jersey, Delaware, Maryland, District of Columbia, Virginia, Ohio, Indiana, and Kentucky. Mr. Rohr has, said that PNC would be interested in deals in or near markets where its, already has branches., The Riggs acquisition gave PNC 51 branches in the Washington area, where, PNC has since opened five more. It said that it plans to open 25 others, there, the middle of 2008., PNC is starting to see some pressure on site locations, given increased, de novo activity from competitors, notably Commerce Bancorp, although PNC, already has 25 sites secured in the market, with six to 10 expected to be, wrote Ms. Appelbaum., (Her firm has done investment-banking work for the company in the last 12, months.), The $40.7 billion-asset Commerce Bancorp Inc. of Cherry Hill, N.J., opened its first branch in Washington last summer. It now has eight in the, region and plans to open 10 a year there for at least the next five years., While the fight for Washington real estate continues, so does the, With competition in PNC's, market fierce, especially in Washington, and consumers no longer, indifferent, between a noninterest-bearing checking account and an interest-bearing, certificate of deposit, PNC might be forced to adjust its deposit rates, Jaime Black of Morningstar Inc., wrote, in a note issued May 30., Ms. Appelbaum wrote that PNC has kept its rates competitive in, Washington., PNC is currently pricing above the market on money market accounts and, On CDs,, is pricing below the market average, while Commerce is priced above the
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by Christine BuurmaVariable annuities are becoming more prevalent within tax-deferred, retirement plans, several insurers say., Fred Conley, the president of Genworth Financial Inc.'s institutional, retirement income group, said companies that have scuttled their defined, benefit plans to cut benefit costs are turning to variable annuities as a, to make the switch easier for their employees., A lot of these firms are thinking that variable annuities may be a nice, way for them to transition out of a defined benefit plan and offer, something, in a defined contribution plan that gives employees a guarantee, Last year Genworth, of Richmond, started offering ClearCourse, of the few variable annuities designed for use within a 401(k) plan., Paychex, Inc., a Rochester, N.Y., benefits outsourcer, selected ClearCourse as a new, investment option for its 401(k) plan earlier this month. It said employees, had requested a pension-like product that would offer them guaranteed, income, in retirement., Other insurers, including ING U.S. Financial Services, Hartford Financial, Services Group Inc., and Sun Life Financial Inc., offer proprietary, variable, annuities inside or outside of tax-deferred retirement plans., Certainly over the last few years, there's been a growing number of, premiums coming in to qualified plans, particularly through 401(k), said John Harline, senior vice president and head of the, financial institutions division at the Atlanta-based ING U.S. an ING Group, subsidiary., There's a great fear among retirees of outliving their money, variable annuities have really evolved into a great retirement income, vehicle, -- both for future retirement income and current retirement income, Harline said., Features that appeal to one investor may not appeal to another. For, example, a retiree concerned about estate planning might be primarily, interested in the death-benefit feature associated with some variable, annuities, Mr. Harline said., Understanding these distinct circumstances and needs helps bank, representatives determine variable annuity suitability and the best, direction, The National Association for Variable Annuities said 42% of the 1, financial advisers it surveyed last quarter sold variable annuities within, tax-deferred retirement plans. The group published the survey results this, month., But selling variable annuities for use within qualified retirement plans, presents compliance issues for banks and brokers. Customers should be, informed that investing in a variable annuity with a 401(k) or IRA does not, enhance the tax deferrals they receive as investors in those retirement, plans, said Scott Sanderson, vice president of marketing and strategic, relationships for The Hartford., They need to be made aware that they're not receiving another tax, deferral for the annuity on top of what they're already getting in an IRA, Mr. Sanderson said., understand they're, selecting the annuity for income feature or another benefit, but not for, Mary Fay, a vice president at Sun Life and the Toronto company' general, manager of annuities, said bankers should disclose the costs and features, associated with the variable annuity and ensure the product meets the, individual investor's unique financial needs and circumstances.
Published in American Banker (2006)
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by Daniel WolfePayPal Inc. is testing a cell phone payment service that could bring some, features of online advertising and shopping to the offline world., Amanda Pires, a spokeswoman for the San Jose unit of the online auction, giant eBay Inc., said its employees began Wednesday to test the PayPal, Mobile, service, which allows consumers to exchange money with one another by, exchanging phone numbers., The service's biggest benefit could be for merchants., In online advertising, consumers can buy the advertised products and, services immediately with little effort. The process is even faster if the, merchant has dealt with the consumer before and has the shipping and, payment, information on file., PayPal aims to duplicate this process offline, and to make merchants', online sales to new customers just as seamless, Ms. Pires said., The payment processor has more than 100 million accounts, 28.1 million of, which were used during the fourth quarter., All these people have already trusted us with their personal financial, so PayPal has all the information, needs to complete any orders for a product this way, Ms. Pires said., A variety of companies are showing renewed interest in using cell, telephones as transactional tools, though the efforts typically involve, adding technology to phones rather than building on existing phone, services., In December, JPMorgan Chase & Co. and Visa U.S.A. began a six-month test, of phones that use a contactless chip to transmit payment information., Morgan, Stanley's Discover Financial Services announced similar plans at that time., Both of the services work only with phones that use Cingular Wireless LLC's, network., Merchants that accept payments through PayPal Mobile would use unique, codes for the things they sell. They could put those codes in any, advertisement, including billboards or newspaper ads, and consumers would, those codes in a text message or phone call to PayPal, which would call the, consumer and request a personal identification number to authorize the, payment. The merchant would then use the consumer's address on file with, PayPal to deliver the product., Ms. Pires would not say how much PayPal plans to charge merchants for its, She also would not say whether this service would be merged with any, products or services PayPal already offers to merchants., directly understand how effective, by studying how many purchases were made from the code, used, in an ad, To use PayPal Mobile for person-to-person payments, consumers would type, in a recipient's phone number instead of a merchant code, Ms. Pires said., payment would be authorized by a PIN., The service will be offered in a few weeks to consumers and merchants in, the United States, Canada, and the United Kingdom, online, payment service can be used in more than 55 countries., Aaron McPherson, a research manager for payments at Financial Insights, Inc., a Framingham, Mass., research unit of International Data Group Inc., said PayPal is not the first company to try this idea., Vayusa Inc. of Waltham, Mass., has a payment service in the Boston area, in which a cell phone is used at the point of sale as if it were a credit, debit card, the charge is deducted from a prepaid account or sent to a, linked, credit or debit card., That service has not really taken off, Mr. McPherson said. Taking the, merging it with PayPal would give it a better chance of being, has the, However, PayPal still may have trouble persuading consumers to use PayPal, The problem with cell phone payments is, why don't you, just
Published in American Banker (2006)
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