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Friday, January 20, 2012

Companies' Q4 2011 financial results mostly positive

Fourth quarter reports are in from many of the biggest players in the payments industry. While it appears payments remains a profitable business, at least one company noted the negative impact on earnings related to the new debit card interchange rate set by the Federal Reserve and required by the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Spend-centricity uplifts AmEx

American Express Co. had fourth quarter 2011 net income of $1.2 billion – a 12 percent increase from the same period in 2010. Earnings per share were up 15 percent in the quarter from the previous year's fourth quarter. AmEx's U.S. card services division reported net income of $727 million (a 4 percent increase from the same period in 2010), while international card services reported $152 million in earnings (54 percent increase), and global network and merchant services netted $324 million (25 percent increase).

Kenneth I. Chenault, Chairman and Chief Executive Officer of American Express, commented, "Results for the quarter underscored the ability of our spend-centric model to generate revenue and earnings growth at a time when consumer behavior and regulations are changing the economics of the revolving credit business. Card members spent a record amount on their American Express cards, continuing a trend that has translated into overall share gains during the last two years."

Chenault said billed business rose 11 percent in the fourth quarter of 2011, online spending remained strong as digital commerce increased its popularity but revolving credit balances continued to grow only marginally. Past-due loans and write-offs are near historically low levels, he added.

Efficiency boosts U.S. Bancorp

U.S. Bancorp showed fourth quarter 2011 revenues of $1.35 billion, an 8.1 percent increase over fourth quarter 2010. The company benefited from receipt of a $263 million settlement from litigation related to the termination of a merchant processing referral agreement. The company said merchant processing revenue was up 17 percent from the previous year.

Richard K. Davis, U.S. Bancorp President and CEO, said his company posted "record earnings for full year 2011." He attributed this achievement to "reduced credit costs and our ongoing dedication to operating efficiency."

"The benefits of our diversified business model were particularly evident this quarter, as our expanding fee-based and balance sheet businesses helped to mitigate the unfavorable impact of recent debit card interchange reductions," he said.

The company said it incurred a $9 million (1.1 percent) decrease in payments-related revenue compared to the fourth quarter of 2010. Although the company saw "an increase in merchant processing revenue, primarily due to increased volume, new business initiatives including new fees for required tax reporting, legislative-mitigation efforts and the reversal of an accrual for a revenue sharing agreement termination," these gains were "more than offset by a decline in credit and debit card revenue due to the impact of legislative-related changes to debit card interchange fees."

The report added that, compared to third quarter 2011, payments-related revenue decreased by 50 million (6 percent). The company attributed this to "seasonally lower transaction volumes in corporate payment products and lower credit and debit card revenue, the result of legislative-related reductions in debit card interchange fees."

International payments emerging for PayPal

Online trading company eBay Inc., the parent company of alternative payments firm PayPal Inc., reported fourth quarter 2011 revenue of $3.4 billion, a 35 percent increase compared to the same period in 2010. The company said PayPal finished the quarter with 106.3 million active accounts, which represents a 13 percent increase over the same quarter in 2010. "On average, PayPal added a million new accounts every month in 2011," the company reported.

Additionally, eBay said PayPal revenue increased 28 percent year over year, mostly due to more businesses and people adopting the technology and more people using eBay. PayPal's net total payment volume was $33.4 billion in fourth quarter 2011, an increase of 24 percent. Mobile payments volume was $4 billion in 2011. The company said this is "more than five times the mobile payment volume in the prior year, as more consumers used their smart phones and tablets to pay online."

In fourth quarter 2011, and for the first time in company history, PayPal's revenues from international markets exceeded revenue from the United States. The company said it believes this demonstrates its "strong global footprint and growth in emerging markets." end of article

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