Market News February 17, 2000

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Market

February 17, 2000

Headlines

Amex buys EDS' ATM network
Competition Briefs
Market News

Amex buys EDS' ATM network

American Express Co. (Amex) has purchased a network of 4,562 ATMs from Electronic Data Systems Corp. (EDS)--making it the second-largest ATM deployer in the nation. New York-based Amex now owns 8,672 ATMs in 46 states--topping Bank One Corp. and Wells Fargo and is second only to Bank of America Corp.--which owns about 14,000 ATMs.

All ATMs acquired by Amex are in 7-Eleven stores. Two weeks ago, Amex teamed up with 7-Eleven, the world's largest convenience store chain, to launch a Super ATM network. Amex plans to introduce financial service kiosks initially in the Dallas/Ft. Worth area. The machines will offer check-cashing, money-order, and wire-transfer services. Future applications may include event ticketing, online shopping, traveler's checks, prepaid phone cards, stored-value cards, and gift cards.

With more than 19,400 stores worldwide and 5,000 stores in the U.S., 7-Eleven is the world's largest provider of retail ATMs, prepaid phone cards, and money orders. The 7-Eleven chain has long served many of the nation's estimated 40 million "nonbanked" consumers--those who have little or no relationship with traditional banking.

7-Eleven aims to become the delivery point for online shopping--either through its Super ATMs or from home. The Super ATMs, which will be installed alongside existing ATMs, will charge service fees slightly less than competing storefront check-cashing operations.

Amex stands to gain increased visibility for its financial products--without investing in brick-and-mortar. In addition, Amex will gain profitable remote traveler's service centers (bankrate.com and American Banker Online Feb. 16).

Competition Briefs

Bank One Corp., the nation’s fourth-largest bank holding company, is looking for employees in an unusual manner-- through ads placed on ATM screens and receipts. According to spokesman Tom Kelly, the ad reads: “Great employment opportunities await you at Bank One. Fax your resume…” Kelly could not say how many applications the ATM ads have generated. But he said Bank One would stick with its regular executive search firm to find a replacement for CEO John McCoy, who retired in December (Reuters Feb. 14) ...

CheckFree Holdings Corp. has agreed to purchase TransPoint LLC, its rival in providing online bill payment and delivery, in a $1 billion stock-swap. Microsoft Corp., First Data Corp., and Citibank, which own stakes in the TransPoint venture, will have a 23% stake in CheckFree when the acquisition closes in the next four to six months. CheckFree president and CEO Pete Sinisgalli said that for the past year billers have badgered CheckFree and TransPoint to find a way to cooperate because their computer platforms are different. Already, nearly 80 firms accept electronic payment via the Internet through either CheckFree or TransPoint (The Wall Street Journal Interactive and CNET News.com Feb. 16) ...

NetBank, an Internet-only bank, saw a 580% surge in checking accounts last year. Atlanta-based NetBank, which introduced free checking accounts in September 1998, posted net income of $3 million last year--a 114% jump from the previous year. Its no-charge checking account offers 3% interest and unlimited free online bill payment. CEO D.R. Grimes said 73% of the bank’s accounts are transactional checking and money market accounts--which typically require a lot of customer interaction and generate a long-term relationship. NetBank recently arranged to make its account information available through Yahoo.com and MSN Money Central and may arrange similar deals with Internet portals in the future ( American Banker Online Feb. 16) ...

Rock star David Bowie, through his firm Ultrastar Internet Services, teamed up with USABancshares.com several months ago to offer David Bowie affinity accounts. As an incentive to open accounts, USBanc offers 12 months of free access to bowienet.com--a so-called “virtual backstage pass” geared to music fans. The site offers debit and credit cards with Bowie’s image. USABancshares plans to market other affinity accounts with celebrities and sports teams (American Banker Online Feb. 16) ...

Contifinancial Corp., a New York-based subprime mortgage lender, said it plans to file for Chapter 11 bankruptcy protection. The firm doesn’t have enough resources to repay its bank loans when they come due March 31. Conti had more than $400 million in bank loans as of August. Conti and its advisers--Lehman Brothers and Blackstone Group, have identified some potential buyers (American Banker Online Feb. 16) ...

SouthBanc Shares Inc. of Anderson, S.C., has agreed to purchase Heritage Bancorp of Laurens, S.C., in a $77 million stock and cash deal. The acquisition, which is expected to close in the third quarter, would create the third-largest thrift in South Carolina. In other news, Bank Plus Corp. of Los Angeles has agreed to sell two branches to Firstfed Financial Inc. of Santa Monica as part of its plan to sell one-fourth of its deposits. Bank Plus will use the proceeds from its branch sales to offset losses in its credit card business (American Banker Online Feb. 16) ...

TD Waterhouse Group Inc. reported a 57% surge in fiscal first-quarter earnings. The online investing service posted earnings of $57 million--up from $20.1 million in the year-earlier quarter. Customer assets jumped 57% to more than $150 billion, and new account openings surged 56% to 260,000. Average trades per day soared 94% to 190,000 from a year earlier. About 72% of all trades were executed online in the first quarter--up from 58% last year. TD Waterhouse, 89% of which is owned by Toronto-based Dominion Bank, is the third-largest Internet broker (Bloomberg News and The Wall Street Journal Interactive Feb. 16) ...

Market News

Housing starts increased 1.5% to an annual rate of 1.78 million units in January--the highest level in a year. The surge occurred despite higher mortgage rates and harsh weather in many parts of the nation. The average interest rate on a 30-year, fixed mortgage was 8.21% in January--up from 6.79% in January 1999. New building permits surged by 8.7% last month--suggesting further gains ahead. The National Association of Home Builders’ housing market index fell to 68 in February--its lowest level in 21 months--as builders became less optimistic about sales over the next six months. However, the index remains high by historical measures (The Wall Street Journal Interactive and Bloomberg News Feb. 16) ...

Native Americans have been left out of the recent surge in homeownership, according to data from the National American Indian Housing Council. Council Chairman Chester Carl estimates the Native American homeownership rate at about 30%. In comparison, the Department of Housing and Urban Development said the U.S. overall homeownership rate reached 67% in the second quarter. The council report, using data from the Home Mortgage Disclosure Act, says that Native Americans are twice as likely as whites to be rejected for a home loan (Inman News Features Feb. 16) ...

The Mortgage Bankers Association’s mortgage applications index tumbled 8.6% during the week ending Feb. 11, as both refinancing and purchase applications declined. The overall index posted a slight increase the previous week. Refinancings made up 18.3% of overall applications in the latest week, while adjustable-rate mortgages made up 30.1% . The average contract interest rate for a 30-year, fixed-rate mortgage was 8.40% last week--up slightly from 8.39% the previous week. Another index by BHK Corp. of Greenwich, Conn., also posted declines in both refinancing and purchase applications during the latest week. Refinancings made up 20% of all applications in that index (mbaa.org and Reuters Feb. 16) ...

Inventories of big-ticked sport-utility vehicles (SUVs) are piling up as gasoline prices rise, according to Autodata Corp., a Woodcliff Lake, N.J.-based industry research firm. Inventories rose to an 81-day supply in January--compared with 70 days a year earlier. Although inflation-adjusted gasoline prices remain near historic lows, they jumped 30% to an estimated average of $1.36 a gallon last month, compared to the previous month, according to the American Petroleum Institute. High sticker prices on the gas-guzzling vehicles also may be crimping sales, and analysts say automakers may launch a new round of incentives to boost sales (The Wall Street Journal Interactive Feb. 16) ...

The U.S. Export-Import Bank is asking investment banks, commercial banks, insurance companies, and other financial institutions to help it provide billions of dollars in loan guarantees and risk insurance for American firms. The Ex-Im Bank is a government export-finance agency that supported almost $17 billion in U.S. sales overseas last year. The agency wants to sell a stake in future export-financing deals to one or more partners--who would then receive a share of Ex-Im Bank’s fees. Financial institutions could set a dollar limit on investments for a particular country—but would not approve or reject individual Ex-Im Bank decisions (The Wall Street Journal Interactive Feb. 16) ...

U.S. import prices rose just 0.1% in January, as increases in petroleum costs slowed. The Labor Department said petroleum prices increased 1.6% last month, slowing from a 6.8% surge in December. It was the mildest gain since June. With oil prices trading at nine-year highs, analysts have been concerned about a surge in energy-driven inflation. Over the past year, U.S. import prices have increased 6.7% while U.S. export prices edged up 0.5% (Reuters Feb. 16) ...