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by Todd DavenportConcerns about creeping costs have become acute as compressed margins and, weakening credit have complicated prospects for revenue growth., Still, the nation's largest banking companies are accepting a higher, occupancy expense as a logical consequence of investing in their retail, business., The occupancy expense rose at each of the country's 13 largest retail, banking companies during the fourth quarter, with an aggregate increase of, 7.3% from the fourth quarter of 2004. Opening branches, refurbishing old, ones, rising real estate prices, and even rising energy costs contributed, the increase., The decline in large-corporate borrowing over the past few years may, ultimately prove to be cyclical, but many companies have interpreted it as, structural shift. They have targeted consumer businesses to compensate for, the decline, and they are expanding and improving their branch networks at, substantial cost to accommodate that strategy., It's a different strategy than the one that drove bank mergers and, acquisitions not so long ago, when adding bulk to the balance sheet was, generally more important than adding depth to the branch network. Merging, companies slapped franchises together and closed branches in an attempt to, engineer profits. Skimping on branches made sense at the dawn of Internet, banking, when experts assumed the irrelevance of bricks and mortar was, merely, a question of time., Many of those mergers resulted in botched integrations, too-sharp costs, cuts, and deposit attrition. Investors, weary of expensive deals that, rarely, met expectations, pushed down the stocks of companies considered likely, acquirers. Saddled with cheap stock, the companies lost the currency to do, deals., But that hardly dimmed banking executives' visions of empire. They just, decided to build rather than buy., De novo branching is a much more widely accepted practice than it was, just four or five years ago, when banks were bragging about reducing the, number of branches and increasing the number of eyeballs on their Web, said Kevin Fitzsimmons, U.S. commercial banks added 2, 339 domestic branches in the year that, ended June 30, the branch total increased 3%, to 78, according to the, Federal Deposit Insurance Corp., Building may be cheaper than buying, but it carries costs of its own. And, given investors' focus on increasing revenue faster than costs, banking, companies must convince them that the potential justifies the additional, expense., The occupancy expense rose 23% at Fifth Third Bancorp compared to the, fourth quarter of *2004-, which it attributed largely to de novo branching., Chief executive George Schaefer said during a Jan. 17 conference call, with analysts that the $105 billion-asset Cincinnati company added 15, branches in the fourth quarter. That meant more salary costs and operating, costs., We could have chosen not to do any of these things, and that would have, brought that expense level down much more similar to what the other people, We would have looked much better on the operating, leverage side, but I think over all for the long term, we have to continue, PNC Financial Services Group Inc. also reported a steep increase in its, occupancy expense: 28% from the fourth quarter of 2004., To create organic growth, we continue to expand and refurbish our branch, chief executive James Rohr said in a Jan. 19 conference call., The $92 billion-asset Pittsburgh banking company's acquisition of Riggs, National Corp. in May added expenses, as well., driven primarily by branches, service centers,, and campuses -- anything where you've got a building, whether rented or, said Gary Townsend, an analyst at Friedman, Billings, Ramsey & Co., Inc., Rising real estate costs also figure into the equation. Banking companies, have generally shown the most enthusiasm for branch-building in markets, with, the population and income growth to support them. Retail space in those, markets comes at a price., If you're building a new branch in one of those ridiculously expense, markets, the northeast or Washington, D.C., the costs certainly have gone, said Nancy Bush, an analyst at NAB Research LLC., Banking companies are measuring their commitment to consumers not just by, the number of branches, but by their quality., De novo branching gets a lot of attention these days, but what some, banks are doing is not necessarily opening a ton of branches, but going, back, Mr. Fitzsimmons said., He mentioned Synovus Financial Corp., which said in June that it would, spend about $30 million to overhaul its 281 branches. The $28 billion-asset, Columbus, company said its fourth-quarter occupancy and equipment, expenses rose 22% from a year earlier, to $94 million., The contribution of leased branches to occupancy expenses is obvious, the costs of ownership, including utilities and taxes, end up there, well., Some of the increase in the fourth quarter is due to the higher energy, said Peter Winter, an analyst at Bank of Montreal's Harris Nesbitt, Corp., One remarkable element of branching strategies is that the big banking, companies have nonetheless been largely successful at keeping overall, expense, growth in check. The 13 largest companies reported an aggregate noninterest, expense increase of just 0.6% for the fourth quarter., Nonetheless, there were scary indicators, not the least of which was the, $6 billion of provisions those companies made in the fourth quarter. Though, many of them chalked up the higher costs to changes in bankruptcy laws, aggregate increase was a 43% jump from the fourth quarter of 2004., And though margin contraction may not get a lot worse, executives, suggested during fourth-quarter earnings conference calls that the problem, likely to persist., Mr. Townsend said weak revenue growth and thin margins have led some, observers to question the wisdom of branch-expansion strategies., Some companies are pulling back. Webster Financial Corp. of Waterbury, Conn., said last week that it has decided to slow down the pace of, branch-building this year. (See related story on page 1.) The $18, billion-asset company, which had expected to open nine branches, expects, to open six., We are very bullish on our de novo program, but we recognize the, environment we're operating in requires us to manage the expenses more, said James C. Smith, Webster's chairman and, chief executive., Mr. Townsend said whether adding branches -- and accepting the attendant, increase in the occupancy expense -- is a strategy that works will vary, from, company to company. He pointed out that there are plenty of mediocre, banking, companies, and that the consequences of failure are serious., There is nothing more expensive than a failed de novo strategy, said.
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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 as its tag line in, television and print advertisements for nearly four years, is preparing to, come out with something new., will be unveiled soon as the new theme. The aim is to, convey the Charlotte company's commitment to service while trumpeting the, accolades it has received for its customer-centric strategy., Wachovia's move and new campaigns by BB&T Corp. and Washington Mutual, Inc. reflect a trend in the past decade that finds many banks trying to be, more personal in their advertising., James Ashworth, the creative director at Woodbine Agency in, now in its sixth, year, has endured for a reason., It's an, emotional campaign that shows that there's more to life than money. It sets, James Garrity, an executive vice president at the $521 billion-asset, 'Uncommon Wisdom' has, Over time we'll be evolving the campaign into the 'Shared Success', Mr. Garrity said in an interview last week. Eventually the company, will play off Wachovia's having earned, the top score five years in a row in the University of Michigan Customer, Satisfaction Survey. The company has not said when it will roll out the new, tag line., Others are updating tag lines or otherwise adjusting their advertising., along with a slightly modified corporate logo. Three days later Washington, to promote the, Seattle thrift giant's new checking product. And Atlanta's SunTrust Banks, slogan., Most large banks now have some sort of catch phrase that they feel, captures what they are all about -- Bank of America Corp., for instance, Claude Singer, a partner at Lippincott Mercer, a New York brand strategy, firm owned by Marsh & McLennan Cos. Inc., said that most modern, than, for, (Chemical is a predecessor of JPMorgan Chase, Your Choice,, slogan.), There are a few forward-thinking brands that take tag lines, Steve Wiggs, who was promoted to BB&T's chief marketing officer about a, year ago, said the $109 billion-asset company wanted a tag line that was, He said in an interview earlier this month that it had hired the Raleigh, ad agency Rockett, Burkhead & Winslow in June, and the agency spent the, next, three months interviewing employees and customers before pitching about 10, you can tell we want your, was a little more obvious., Wamu, which has assets of $343 billion, switched ad agencies to Leo, Burnett USA in December. Wamu's chief marketing officer, Genevieve Smith, said the purpose behind the new ad campaign and checking product is to, offer, alternative in an industry that is not always viewed, pro-consumer., said it was fortunate that for the merger that created the new Wachovia, Uncommon Wisdom for Shared, which its Mullin ad agency split into two slogans., Mr. Garrity said the average tag line lasts less than three years and, that the typical marketing executive has an even shorter tenure. (Mr., Garrity, a former chairman of the Assn. of National Advertisers in New, York,, has been Wachovia's chief marketing officer for five years.), Several banks have hired executives from the retail sector as they seek, to differentiate themselves. In September, Commerce Bancorp Inc. in Cherry, Hill, N.J., hired Jon Sandeen, a former Wal-Mart Stores Inc. executive, oversee its branch-building campaign. A month later BankAtlantic Bancorp, Inc., in Fort Lauderdale, Fla., hired Mark Begelman, a former president and chief, operating officer of Office Depot Inc., as its chief marketing officer., Jim Cole contributed to this report.
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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 Steve BillsDespite the concerns some are raising about the security of online, banking, banks and vendors are continuing to show interest in single, sign-on, technology, which is meant to make it easier for users to authenticate, themselves to multiple Web sites., Last week the Calabasas, Calif., online banking outsourcer Digital, Insight Corp. said it had added a single sign-on feature to its business, banking service for connecting banks' small-business customers to third, parties., Bryan Laws, Digital Insight's director of cash management, said the, single sign-on system let a small business to log in to their bank's Web, site, and then access third-party applications without being asked for a second, password., Currently the single sign-on feature works only with a third party's, you can see the potential of that expanding, to a, Mr. Laws said., However, Avivah Litan, a vice president and research director at Gartner, Inc. in Stamford, Conn., said using a single sign-on to bypass these, It's usually convenience, versus, security, and you're putting convenience ahead of security with single, The two goals of convenience and security seem to be diametrically, opposed, and experts acknowledge that achieving both can be tricky, both, goals are worthy and can be made to coexist., Last week the Electronic Authentication Partnership Inc., a consortium of, companies and government agencies promoting single sign-on authentication, named Jane Hennessy, a senior vice president at Wells Fargo & Co., as its, chairwoman., The EAP is entering a critical phase -- moving from concept to reality, Ms. Hennessy said in a press release., The group was organized a year ago to develop standards for single, sign-on. Its backers include ABN Amro Services Co. Inc., the American, Bankers, Association, eBay Inc., National City Corp., Sallie Mae, University Bank of, Ann Arbor, Mich., and Wachovia Corp., Earlier efforts to develop a single sign-on system have languished., Microsoft Corp. pioneered a single sign-on strategy in its Passport, software,, which was conceived as a centralized password repository that could be, used to, access different companies' Web sites. However, at the moment the software, used mainly to access other Microsoft products and services., Another single sign-on consortium, the Liberty Alliance, was formed in, *2001-, but only a handful of companies are using its authentication tools., The Liberty Alliance is composed of more than 150 banking and technology, companies, including Bank of America Corp., American Express Co., Citigroup, Inc., MasterCard International, Visa U.S.A., and Sun Microsystems Inc., Scott Mackelprang, the vice president of security and compliance at, Digital Insight, said its single sign-on software has incorporated, multifactor authentication procedures that require people to either use a, single computer to log in to their bank's site, or to carry a security, token, to do so., Digital Insight is using technology from TriCipher Inc. of San Mateo, Calif., which inserts in the user's browser a file that is needed to access, the bank's Web site. The file prevents an unauthorized person from logging, from another computer, even with a password, Digital Insight said., The file can also be stored on a token that can be carried around to, access the bank's site from multiple computers., Mr. Mackelprang said Digital Insight's security system would be able to, accommodate other technologies in the future, This is, Ms. Litan said multifactor authentication addresses the concern that, single sign-on could let a criminal gain access to multiple Web sites by, obtaining a single site's password., If you are strongly authenticating, then you can afford to offer more, The Federal Financial Institutions Examination Council issued guidance in, October calling for multifactor authentication in online banking by the, end of, this year., Michael Jackson, an associate director of the Federal Deposit Insurance, Corp. and the chairman of the FFIEC's subcommittee on information, technology,, said that regulators are not concerned about the concept of a single, sign-on,, but that the real challenge is in developing the interoperable systems, needed, to make it practical., You're only as secure as the strength of your security software, said.
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by Steve BillsThe imaging-software vendor Carreker Corp. said Monday it would put, itself up for sale, after coming under pressure from an activist, shareholder., The Dallas company announced that it has retained Bear, Stearns & Co., Inc. as financial adviser to explore options aimed at enhancing shareholder, Our board of directors and management are strongly committed to, acting in the best interests of our customers, employees, Carreker, the company's chairman and chief executive, said, a press release., The news came on the heels of a Friday annoucement that Chapman Capital, a Los Angeles hedge fund, was urging Carreker to sell itself. In a, press, release, decidedly derelict, Chapman Capital estimated that Carreker could bring more than $12 a share, in a private sale. Carreker, which sells a large suite of payments software, and consulting services, closed at $6.39 Monday, down 1.69%., Chapman Capital said Friday in a filing with the Securities and Exchange, Commission that since June 1 it has acquired 1.4 million shares, or more, than, 5% of Carreker's stock., Robert L. Chapman Jr., the hedge fund's managing member, said Monday that, I told Denny Carreker that, there were two ways to stop Chapman Capital's aggression -- to hire an, It looks like, In an interview Friday, they are, of his efforts to drive Carreker's value higher by, forcing, I think, given Carreker's market share and customer base, there, will, Carreker has customers ranging from community and regional banks to the, industry's giants, including more than 75 of the nation's largest 100, banks., In the past two years it has announced software licensing deals with, Wachovia, Corp., Wells Fargo & Co., SunTrust Banks Inc., BB&T Corp., and Regions, Financial Corp., among others., But its sales have been weak and its stock has languished. Last week, Carreker reported a net loss of $34, 000 for its fiscal first quarter, which, ended April 30. In the quarter before that it had income of $1.5 million, and in the year-earlier quarter it had income of $498,000., Its stock has hovered between $4 and $8 since the start of *2005-, well, down from its all-time high of close to $40 in early 2001., In a letter dated June 7 to Mr. Carreker, Mr. Chapman said the vendor, first caught his eye in July *2005-, when another institutional investor, Prescott Group Capital Management LLC of Tulsa, complained that the shares, were undervalued., Phil Frohlich, the principal of Prescott Group, would not comment Monday, on Chapman Capital's letter. He noted that Prescott Group president Jeffrey, D. Watkins had been named to Carreker's board in March., to generate shareholder value, Mr., Frohlich said. According to a Carreker proxy statement filed last month, May 19 Prescott Group held 1.8 million shares, or 7.2% of the total shares, outstanding., Carreker admits it has underperformed its peers. In the proxy it, acknowledged that the total return on its stock has fallen during the past, five years, to less than 22% of its 2001 benchmark., In contrast, the total return for a self-defined group of banking, technology peers -- which Carreker identified as Bottomline Technologies, Inc., Corillian Corp., eFunds Corp., Fundtech Ltd., Jack Henry & Associates, Inc., Open Solutions Inc., Pegasystems Inc., S1 Corp., and Transaction, Systems Architects Inc. -- climbed to 118% of the 2001 benchmark. The, Standard & Poor's 600 Small-Cap Index climbed to 173 over the same period., (Carreker is a component of the S&P Small Cap 600.), S1 is also under pressure to sell. The Atlanta vendor of Internet banking, software and products for other banking channels agreed last month to, explore, a sale and to add to its board a representative of the New York investment, management firm Ramius Capital Group LLC, which has acquired almost 10% of, S1's shares., Christine Barry, a research director at Aite Group LLC in Boston, said, Carreker is one of the few remaining independent imaging vendors. Several, other imaging providers have sold themselves in recent years., They are being acquired by more of these bigger companies, like, Metavante, that have a broader range of products in the market, Ms. Barry, said., Metavante Corp., the technology subsidiary of the Milwaukee banking, company Marshall & Ilsley Corp., bought two check-image vendors in 2004:, Advanced Financial Solutions Inc. of Oklahoma City, which primarily serves, smaller banks, and VectorSGI of Addison, Tex., a maker of big-bank imaging, systems., Ms. Barry said Carreker's assets might fetch a good price in an auction., On a stand-alone basis they are suffering. As part of a broader portfolio, A lot of the core banking companies are, trying to get into every area and provide everything that a bank would
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by Christine BuurmaThough Boston Private Financial Holdings Inc. is relatively late to enter, the separately managed account business, through its deal for an 80% stake, the Boston asset manager Anchor Holdings LLC, the private bank says, Anchor's, specialized investment offerings and established client base will help it, compete in a crowded market., Boston Private and Anchor executives had known each other for roughly a, decade, Walter Pressey, the private banking company's president, said in an, interview Monday, but the bank decided to wait for the managed account, industry -- and Anchor's product -- to develop more fully before making an, acquisition. He estimated the deal price at about $68 million., In earlier conversations, Anchor was just beginning to create the, separately managed account business, and we were trying to understand a, The SMA, business, has changed dramatically over the past few years. ... it's a much more, And Anchor's reputation as a strong mid-cap asset, manager will help set Boston Private apart from rival providers, Research entities have forecast rapid growth in separately managed, accounts during the next six years. The TowerGroup unit of MasterCard, International predicted in October that managed account assets would grow, a compound annual rate of 16.6% through *2011-, from $400 billion in 2001 to, $1.7 trillion 10 years later. And a Money Management Institute report last, year projected that separately managed account assets would reach $1.6, trillion to $2 trillion by 2011., Wire houses have dominated separately managed accounts, holding a 77%, market share in *2005-, according to an MMI survey, while banks' market share, For banks to keep pace with industry growth and simultaneously, double market share penetration to 15% over the next five years, they would, need to more than quadruple their assets, to about $195 billion, institute said., The separately managed account business of Anchor Capital, a unit of, Anchor Holdings, had one of the highest rates of return in the industry, 17.44%, during the past 40 quarters, according to a research note issued, Monday by Sandler O'Neill & Partners analysts Mark Fitzgibbon and Frank, Schiraldi. The two analysts judged the Anchor deal to be a boon for Boston, Private's shareholders., Anchor has about 12, 000 separately managed account clients, a large, Mr. Pressey said. The company has, established managed account sales force and relationships with several wire, houses, he added, as well as a nationwide distribution footprint., You need an experienced sales force because the salespeople have to, spend an awful lot of time with the client on this product, The deal will improve fee income's share of Boston Private's revenue to, 49%, from 45%, Mr. Pressey said., The purchase would also bolster Boston Private's effort to expand in New, England, the bank said it was examining acquisition, opportunities in southern New Hampshire, Newport, R.I., Cape Cod, Massachusetts west of the Boston area., Anchor's separately managed account services will also create, cross-selling opportunities for the bank, A lot of the, high-net-worth SMA clients would be prospects for private banking, Banking companies like Citigroup Inc. have sold their managed account, businesses to companies that focus on asset management as their core, business, he noted. Citi sold its asset management business to Legg Mason, Inc. in December. Boston Private's emphasis on asset management puts it in, different position than Citi's, he indicated., Boston Private has been an active buyer. In October, it bought Gibraltar, Financial Corp., an $888 million-asset thrift company in Coral Gables, Fla., In *2004-, the holding company bought 81% of KLS Professional Advisors Group, Inc., a New York wealth manager that handles $2.7 billion of client assets., The Sandler analysts praised the Anchor deal's structure, with its big, earn-out portion giving Anchor management a strong incentive to exceed, earnings goals. Under terms of the deal, Anchor will pay 60% of the, estimated, $67.8 million price when the transaction closes in the second quarter and, will, make future payments based on Anchor's reaching earnings goals in the next, five years., Anchor Holdings LLC is a newly created holding company that owns the, investment management firms Anchor Capital Advisors Inc. and Anchor, Russell, Capital Advisors Inc. Anchor, Russell is an asset manager that is, co-sponsored, the Frank Russell Co. and supplies investment options managed by, Russell., Under terms of the agreement, Anchor management is to retain a 20% stake, in the firm.
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by Laurie Kulikowskiky Financial Group Inc., which has used a string of acquisitions to, increase assets 43% over the last three years, has made an addition to its, management team to help the company grow organically., The $15.7 billion-asset Bowling Green, Ohio, company, hired Gary Small, from National City Corp. this month to fill the newly created job of head, community banking., Mr. Small, who joined Sky on March 6, will be in charge of generating, revenue through Sky's eight regional markets in the Midwest covering five, states. The eight regional presidents will report directly to Mr. Small, instead of Marty E. Adams, Sky's chairman, president, and chief executive., Mr. Adams said in an interview last week that Mr. Small will help the, company focus on its top priority -- organic growth., As we grow, I really can't dedicate all the time I want to that many, Gary will have more time and has more experience, branch, all the things that are really important, Having somebody dedicated full-time to that role should help Sky increase, its asset total to between $20 billion and $30 billion within three years, organically and through acquisitions, Mr. Adams said., Mr. Small, served in various positions during his 13-year tenure At, National City. Most recently he was an executive vice president and the, coordinator of business unit integration. Previously he had led the, Cleveland, company's branch efforts in Chicago, Indianapolis, and northern Indiana., At Sky, he will hold the title of corporate executive vice president and, will report directly to Mr. Adams., Sky said Mr. Small was not available for an interview, but Mr. Adams said, he would focus on things like improving revenue from small-business lending, and boosting home equity lending., Last month it agreed to buy Union Federal Bank of Indianapolis from, Waterfield Mortgage Co. Inc. of Fort Wayne, Ind., for $330 million in cash, and stock. The $2.7 billion-asset Union Federal would be Sky's largest, acquisition to date and would move it into the Indianapolis market, where, currently has no branches. Indianapolis would become Sky's ninth region., In an interview discussing that deal, Mr. Adams said Sky would also, continue to look at acquisitions as a way to both increase its balance, sheet, and enter faster-growing markets., Last week Mr. Adams said Mr. Small's hiring, coupled with acquisitions, should better equip Sky for dealing with the Midwest's fierce competition, loans and deposits., Because our region might have a slower growth rate than some other, hotter areas in the country, we need to take business from the, We believe our model and our people will allow us to do, that. I don't expect it to get any easier, but I don't know if it's gotten, Terry McEvoy, an analyst at Oppenheimer & Co., said Sky must improve its, loan and deposit gathering strategies to achieve its long-term earnings, growth target of 10% to 12%., looking at the last few years, they, What's contributed to the growth, Andrew Marquardt, an analyst at Swiss Reinsurance Co.'s Fox-Pitt, Kelton, Inc., said Sky's agreement to acquire Union was the catalyst for Mr., Small's, hiring., that can be more, attentive to the day-to-day operations across the company, Mr. Marquardt, to be on the sidelines for additional, meaningful deals in the near term and are cognizant that part of their, a confirmation that management is indeed taking, March 13 and said the upgrade was partially driven by management's, He also increased his earnings, estimates by a penny for this year, to $1.88 a share, and by 2 cents for, next, year, to $2.02.
Published in American Banker (2006)
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by Todd DavenportIn another sign of its escalating conflict with institutional, shareholders, Sovereign Bancorp Inc. said it would delay its annual, shareholders meeting to give itself time to integrate its pending, acquisition, of Independence Community Bank Corp. of Brooklyn, N.Y., The Philadelphia thrift company, which over the last decade has never, held its annual meeting later than April 27, said Wednesday that it will, hold, this year's meeting after Aug. 31, so the proxy contest initiated by, Relational Investors LLC, its largest shareholder, will not be a, distraction, during the integration., Analysts and investors criticized the delay and questioned Sovereign's, motives. Many said delaying the meeting will give the company ample time to, put a substantial chunk of stock in the sympathetic hands of Banco, Santander, Central Hispano SA, which is buying a 19.8% stake., Sovereign's board is going to do everything in its power to maintain, control and to thwart the efforts of Relational, and this is just another, said Matthew Kelley, an analyst at Moors & Cabot, Inc., The Sovereign shareholder base is really the one that has been denied the, Closing the three-way transaction in time to let Banco Santander vote its, shares at the annual meeting would be a substantial obstacle for, shareholders, trying to unseat Sovereign's directors., When Santander acquires its stake, institutional ownership of Sovereign, said Joseph Fenech, an analyst at, If there is going to be a proxy fight and, investors are against the deal, then it's to Sovereign's interest to hold, Sovereign said Wednesday that its board amended the bylaws governing, shareholder meetings to remove a reference to the third Thursday of April, the target date for the meeting. Neither Pennsylvania corporate law nor, securities regulations appear to preclude such a delay., Nell Minow, the co-founder and editor of The Corporate Library LLC, governance research firm in Portland, Maine, said the delay is another, example of Sovereign's weak corporate governance., Every time I think it can't get worse at Sovereign, they amaze me and it, If you go to, capital markets for money, you promise a certain level of accountability., Sovereign said it decided to delay the meeting to focus on integrating, before it becomes necessary to devote very, Relational., But that reasoning inspired mostly skepticism. Mr. Kelley said it was a, core, Franklin Mutual Advisers LLC, Sovereign's second-largest shareholder, a transparent ploy to disenfranchise the company's, Lee Delaporte, a portfolio manager at Dreman Value Management, another, by the announcement., It did not surprise me, but it does reinforce my feelings on management:, I can't believe that this, isn't, being done to put a roadblock in front of the ability to change or put, forth, a couple of other options for board membership. They seem to be pulling out, Institutional Shareholder Services Inc., a proxy-consulting firm that, advises or directs voting by several of the thrift company's other, premature to speculate on our, will be a factor that we will, A Sovereign spokesman would not discuss the reactions to its decision to, delay the meeting. Relational did not comment by press time.
Published in American Banker (2006)
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by Steve Billsrivate Business Inc., a Brentwood, Tenn., financial technology company, has pushed further into the banking industry by buying the assets of PTC, Banking Systems Inc., a Bradenton, Fla., teller-automation software, developer., The purchase was announced Wednesday. Private Business did not say how, much it paid., Private Business plans to integrate PTC's software, including its, flagship product, WinTeller, into its own products for community banks and, middle-market companies., Kjell Purnell, the president and chief executive of PTC, said in the, press release announcing the acquisition that he expects to join Private, Business' management team., Last month it paid $6.9 million in cash and stock for Captiva Solutions, an Atlanta core data and item processing services provider that was, formed last year. As part of that deal, Captiva chief executive Lynn Boggs, became the CEO of Private Business. (Before joining Captiva, Mr. Boggs had, been the president and chief operating officer of the Atlanta core and item, processing outsourcer InterCept Inc., which Fidelity National Financial, Inc., of Jacksonville, Fla., acquired in 2004.), In the press release, another step, in our plan to provide a full-product suite to community financial, PTC had 80 financial customers in the United States., Private Business, founded in *1990-, offers core data processing, accounts, receivable financing, cash management, financial accounting tools, electronic, image, item processing, and online debt collections software.
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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.
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
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by Steve BillsCorillian Corp., of Portland, Ore., has agreed to make its online, authentication software compatible with aggregation software from Yodlee, Inc., of Redwood City, Calif., The two companies announced their collaboration Monday and said it would, help banks comply with guidelines from the Federal Financial Institutions, Examination Council, which encourage financial companies to improve their, online security., Corillian's Intelligent Authentication software grants quick site access, to users logging in from their regular computers, through their regular, Internet service providers, or under other preestablished conditions., Financial companies can require additional authentication for those seeking, access in some other way., Making it compatible with Yodlee's software would enable Yodlee to gather, data from banking companies that use Corillian's software., Corillian's Web site lists 21 large and midsize banking companies as, users of its of online banking software and other products, Yodlee lists 25, banking, brokerage, and portal sites. The two have several customers in, common, including Bank of America Corp., Comerica Inc., Compass Bancshares, Inc., JPMorgan Chase & Co., National City Corp., and Wachovia Corp., As our financial institution clients look to deploy multifactor online, authentication solutions, they want the ability to ensure that it, seamlessly, interoperates with existing online systems like Yodlee's financial, said Alex Hart, Corillian's president and chief executive, a press release.
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by Laurie KulikowskiProsperity Bancshares Inc. of Houston received a pair of upgrades for, closing its largest banking acquisition earlier than anticipated., Bain Slack of Keefe, Bruyette & Woods Inc. raised his rating on the $4.5, market, Peter J. Winter of Bank of Montreal's Harris Nesbitt Corp. upgraded the, stock, Both analysts said they are increasingly optimistic about Prosperity's, outlook, mostly because its $238.7 million acquisition of SNB Bancshares, Inc., of Sugar Land, Tex., closed April 1, several weeks earlier than expected., When the deal was announced in November, analysts had expressed, skepticism about the benefits for Prosperity, beyond the fact that it would, expand in high-growth Texas markets. The $876.4 million-asset SNB was, liability sensitive and had too much leverage on its balance sheet, analysts, said., However, improved its balance sheet from the fourth quarter to the end of the first, quarter., What that tells us is that the integration really started before the, This gives Prosperity a head start with, regard, Prosperity said it would complete the integration by May 1., Mr. Winter wrote in a note that SNB sold off $205 million of investment, securities to pay down borrowings, improving its net interest margin by 68, basis points from the fourth quarter, to 3.64%. It also sold $40 million of, loans and $12 million of nonperforming assets that Prosperity was not, comfortable retaining, he wrote., Dan Rollins, Prosperity's president and chief operating officer, said in, did not see the benefit of the SNB, transaction, when we made the announcement, However, his, company, Prosperity's pristine credit quality and anticipated benefits from a, steepening of the yield curve also contributed to the upgrades. The, analysts, said the company likely will not sell in the near term, though it has made, several investment banks' merger and acquisition target lists., When credit quality does turn, these guys are, Last week Prosperity said its first-quarter, earnings rose 21.9% from a year earlier, to $12.9 million, or 46 cents a, share. Its shares rose 2.5% early Monday but later fell to close up 0.8%.
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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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