eCommerce Sales Up 19%

Consumer technology e-commerce sales rose 19 percent in the first two weeks of the holiday shopping season, industry tracker NPD Group said Friday, providing a bit of good news in an otherwise gloomy period for retailers.

Online sales in the two weeks ended December 6 climbed to $700 million, with LCD TVs, notebook computers and digital cameras leading the way.

"It's up in an environment where everything else is down," said NPD analyst Stephen Baker. "The economy is in play because people at least perceive that pricing is cheaper online."

E-commerce sales showed strength even as traditional holiday sales are faltering.

Last week, NPD said U.S. consumer technology brick-and-mortar sales showed their first-ever decline during the week of Black Friday, from November 23 through November 29, falling more than 8 percent to $2.03 billion .

Baker said consumers continue to migrate to the Web to make their technology purchases. Online buyers tend to be higher-income and a bit more gadget-savvy, so it's not so surprising that e-commerce technology sales are faring better than traditional sales, he said.

Related articles by Zemanta

• About Half of Consumers Haven't Finished Holiday Shopping
• Black Friday: Not so black after all
• Holiday shopping off to higher start

Discover Releases 4Q Results

Discover releases fourth quarter results

Riverwoods, Ill., Dec. 18, 2008 -- Discover Financial Services (NYSE: DFS) today reported results for the quarter and year ended November 30, 2008 as follows:

Full year income from continuing operations was $1.1 billion, up 10% from last year. Fourth quarter income from continuing operations was $444 million, up from $210 million in the fourth quarter of 2007. Income from continuing operations includes antitrust litigation settlement proceeds of approximately $535 million (after-tax) in the fourth quarter of 2008. Discontinued operations relates to the sale of the Goldfish business.

Fourth Quarter Highlights

• The company grew managed loans 6% from last year to $51 billion; Discover Card sales declined 2% to $22 billion.
• The fourth-quarter managed net charge-off rate was 5.48% and the managed over 30 days delinquency rate was 4.56%.
• The company added reserves in excess of charge-offs of $415 million.
• Owned loans grew $3.5 billion from the third quarter, including $2.6 billion due to maturing securitizations retained on the balance sheet.
• Total deposits grew 15% to $29 billion, including $6 billion of direct-to-consumer deposit balances.
• Third-Party Payments segment volume grew 39% to $34 billion, including $7 billion of Diners Club International volume.
  

“Our results and financial position reflect our conservative orientation toward growth, credit risk and capital management as we position Discover to weather the economic downturn,” said David Nelms, chief executive officer of Discover Financial Services. “As part of our capital management, we are seeking to participate in the Treasury’s Capital Purchase Program which will further support our consumer lending operations.”

Settlement of Antitrust Litigation

On October 27, 2008 Discover reached a $2.75 billion settlement of its antitrust lawsuit with Visa and MasterCard. Discover received an $863 million payment in November 2008, and expects to receive the remaining proceeds in equal $472 million installments over the four quarters of 2009. The proceeds will be reflected as revenue in Discover’s U.S. Card segment in the period earned.

At the time of the spin-off of the company, Morgan Stanley and Discover entered into an agreement governing the manner in which the antitrust case was to be pursued and settled and how proceeds of the litigation were to be shared. The company has notified Morgan Stanley that it breached the agreement and the amount of the dividend to Morgan Stanley, if any, is a matter of dispute.

Liquidity and Capital

The company continues to maintain liquidity and capital positions that it believes are appropriate for the current environment. Cash liquidity was $9.4 billion and tangible equity was $5.5 billion, or 11.0% of net managed receivables, at November 30, 2008. The company applied to the U.S. Treasury to participate in the Capital Purchase Program and to the Federal Reserve to become a bank holding company. Segment Results (Managed Basis):

U.S. Card

Managed loans grew to $51 billion, up 6% from last year and 1% from last quarter as decreased consumer spending and balance transfer activity were offset by lower cardmember payments and growth in installment loans. Sales volume decreased 2% versus fourth quarter of 2007, and increased 2% on a full year basis.

Credit performance of the Card portfolio was consistent with Discover’s expectation as charge-offs rose, reflecting the deteriorating economic environment. The managed over 30 days delinquency rate of 4.56% was up 71 basis points from the third quarter of 2008, and 98 basis points from last year. The managed net chargeoff rate increased to 5.48% for the fourth quarter of 2008, up 28 and 163 basis points, respectively, from last quarter and last year. The full year net charge-off rate was 5.01% up 118 basis points from last year. Based on current trends within the portfolio and in the economic environment, the company believes that the managed net charge-off rate in the first quarter of 2009 will exceed 6%.

Fourth Quarter

Pretax income was $646 million in the fourth quarter of 2008, including other income of $863 million related to proceeds from the antitrust settlement. Pretax income was $321 million for the fourth quarter of 2007.

Managed net interest income increased $162 million, or 18%, an improvement of 79 basis points over fourth quarter of 2007. Higher net interest income benefited from lower cost of funds, growth in loan balances and accretion of balance transfer fees previously included in loan fee revenue, partially offset by higher interest chargeoffs. Provision for loan losses increased $521 million, or 89%, due to higher net chargeoffs and an increase in loan loss reserves in excess of charge-offs in the quarter. The reserve increase in excess of charge-offs of $415 million resulted from a higher reserve rate as well as higher on-balance sheet loans due to maturing securitizations.

Other income increased $630 million, reflecting the antitrust settlement partially offset by a reduction in the fair value of the interest-only strip receivable. The decline in the fair value of the interest-only strip receivable was due to no securitization gains in the fourth quarter as the company did not enter into new securitization transactions, along with higher anticipated charge-offs in the current environment.

Expenses decreased $54 million, or 9%, primarily attributable to lower compensation and marketing expense partially offset by increased professional fees. Compensation expense included a $39 million one-time benefit due to curtailment of the company’s pension plan. Marketing declined due to lower account acquisition and balance transfer volume as well as lower advertising costs.

Full Year

Pretax income was $1.6 billion in 2008, including other income of $863 million related to the antitrust settlement. Pretax income was $1.5 billion for 2007. Managed net interest income increased $551 million, or 15%, an improvement of 79 basis points over 2007, reflecting an increase in interest income and a decrease in interest expense. Interest income benefited from growth in loan balances and the transfer of balance transfer fees to interest income, partially offset by higher interest charge-offs and lower investment income. Interest expense decreased reflecting a lower cost of funds, partially offset by higher borrowings to fund higher loan balances.

Provision for loan losses increased $1.2 billion, or 66%, due to higher net chargeoffs and an increase in loan loss reserves in excess of charge-offs during the year. The reserve increase in excess of charge-offs of $615 million resulted from a higher reserve rate as well as higher on-balance sheet loans due to maturing securitizations.

Other income increased $673 million reflecting the antitrust settlement and higher discount and interchange revenue, partially offset by a write-down of the interest4 only strip receivable and the transfer of balance transfer fees to interest income. Discount and interchange revenue benefited from growth in sales volume. Expenses decreased $79 million, or 3%, primarily attributable to the pension curtailment benefit; lower account acquisition and promotional marketing activity; and a decrease in costs related to litigation.

Third-Party Payments

Fourth Quarter

The Third-Party Payments segment transaction volume was $34 billion, up 39% from last year, reflecting the addition of Diners Club International volume of $7 billion, as well as increased volumes on the PULSE and Discover networks. Pretax income of $21 million was up $13 million from the fourth quarter of 2007. Diners Club International contributed $4 million to the segment’s pretax income. Revenue increased $24 million due to increased volumes and fee revenues, as well as a $15 million contribution from Diners Club International. Expenses increased $11 million due to the inclusion of Diners Club International.

Full Year

The Third-Party Payments segment transaction volume was a record $125 billion, up 36% from last year, reflecting the addition of Diners Club International volume of $13 billion, as well as increased volumes on the PULSE and Discover networks. Pretax income of $81 million was up $44 million from 2007 including $11 million related to Diners Club International, which was acquired in June 2008. Revenue increased $61 million due to increased volumes and fee revenues as well as a $28 million contribution from Diners Club International. Expenses increased $17 million due to the inclusion of Diners Club International.

Discontinued Operations

Discontinued operations represent the company’s Goldfish business in the United Kingdom, which was sold to Barclays Bank PLC on March 31, 2008. In the fourth quarter of 2008, the company recognized a loss from discontinued operations, net of tax, of $12 million versus a loss of $266 million in the fourth quarter of 2007. The fourth quarter of 2007 included an impairment charge to write down goodwill and intangibles to fair value of $279 million, after-tax.

Dividend Declaration/Stock Repurchase Program

The company’s board declared a cash dividend of $.06 per share, payable on Jan. 22, 2009, to stockholders of record at the close of business on Jan. 2, 2009. No stock repurchases were conducted under the stock repurchase program during the fourth quarter.

Conference Call and Webcast Information

The company will host a conference call to discuss its fourth quarter results on Thursday, Dec. 18, 2008, at 10 a.m. Central time. Interested parties can listen to the conference call via a live audio webcast at http://investorrelations.discoverfinancial.com .


Source: Company press release.

discover, fourth quarter results, antitrust

Related articles by Zemanta

• David (Discover) Nelms at Executives Club of Chicago
• Discover Card Buys Citigroup's Diners Club
• Goldman Sachs Reports $2.1 Billion Quarterly Loss
• Stocks retreat after Morgan Stanley posts loss

Visa Introduces SMS in China/Taiwan

Visa introduces SMS passwords for e-commerce

San Francisco, Dec. 19, 2008 -- Visa Inc. has partnered with banks in China and Taiwan to introduce an SMS-based one-time password system for cardholders to authenticate themselves when making online purchases.

The service is based on the card network's Verified by Visa authentication system, which requires cardholders to punch in a secret PIN when paying for goods over the Internet. But instead of the customer using a fixed code, they are sent a one-time password to their mobile phone which is used to verify their identity.

Visa is introducing the service with Chinatrust Commercial Bank in Taiwan and China Everbright Bank in China. To sign up, customers enroll their cards for Verified by Visa and register a designated mobile phone number on their bank's Web site.

When making an online payment, the customer enters their card number and a screen from the bank appears and asks for the password. At the same time, a one-time password is sent to their mobile phone via text message, which is used to verify the transaction Visa says this makes online shopping more secure and eliminates the need for the cardholder to remember their password.

Rahul Khosla, COO, Asia Pacific, Visa, says: "By adding a one-time password service to Verified by Visa we aim to give our cardholders even greater peace of mind with an added layer of control and security when they make payments online."

In November four European banks agreed to pilot a new Visa card comprising a display for generating one-time numeric codes for consumers to use when transacting online or by telephone.

For more information, visit www.visa.com .

Source: Company press release.

Related articles by Zemanta

• Europe to cap prices for roaming text messages and data