Ms. Kamala Worthington

GLG News by Ms. Kamala Worthington, President

WAMU CLOSED: SOLD TO JP MORGAN CHASE FOR $1.9 BILLION

September 29, 2008

Analysis of:WaMu Becomes Biggest Bank to Fail In US History | news.yahoo.com

Rumors had been swirling over the last few weeks that WAMU was shopping for a buyer, however, the OTS (the Office of Thrift Supervision) couldn't allow WAMU to continue its operations under constraints of deposit outflows exceeding $16 billion in the last week or so and JP Morgan Chase becomes the benefactor of WAMU's collapse and acquires WAMU's deposits for a low ball amount of $1.9 billion. WAMU may have staved off a collapse if the proposed $700 billion bailout plan had been approved, however, what we witnessed this week was alot of grandstanding and political posturing but no agreement to pass and legislate the proposed $700 billion bailout plan. WAMU becomes the latest news headline and the largest FDIC-insured institution on the list of bank failures in 2008. The FDIC fund wasn't impacted by WAMU's collapse, however, other S&L's and thrifts that have failed to meet their fiduciary responsibilities have only added to the downward spiral of the U.S. economy. 

TRM Gets $11 Million Lifeline; Buys Rival "Access to Money"

April 23, 2008

Analysis of:BREAKING: TRM Buys ATM ISO Access to Money for $15 million | www.atmmarketplace.com

TRM's $11 million "lifeline" from LC Capital Master Fund Ltd. helps the troubled ATM owner pay off its debts and gave TRM the seed money to acquire its rival, ATM deployer "Access to Money." When TRM acquired eFunds ATM Portfolio of 17,200 ATMs in 2004 for $150 million, TRM had over 22,000 ATMs and owned the largest international ATM network by a U.S. company. Since that time TRM has restructured its ATM Operations and its ATM Network fell to less than 9,300 ATMs and forced TRM to sell its international ATM Operations and what use to be its "core" business, its "Photocopier Unit" to remain in business. TRM grew way too fast through acquisitions and the acquisitions didn't generate significant cashflows or decent ROI. Since 2Q07, TRM has focused on its current assets rather than growing through acquisitions, reduced its expenses, simplified business operations, cleaned out those low transacting ATMs acquired from eFunds and added units to their legacy ATM fleet.   

RBS To Raise $20 Billion+ In A Rights Issue & Sir Fred Goodwin Can Keep His Job For Now

April 21, 2008

Analysis of:RBS Set To Announce Major Capital Increase | www.iht.com

It's hard to fathom that "Fred the Shred's" (known for his brutal cost-cutting in the past) role in the battle for ABN-Amro between Barclays may have led to RBS's plans to raise the largest cash call of British banks of $20 billion+ in a 1-for-2 basis "rights issue" to raise capital and shore up its balance sheet. RBS may also sale its business unit Angel Trains for $6.9 billion to raise capital. RBS has already wrote down over $3.3 billion on the value of mortgage-backed securities, loans to private equity groups and securities guaranteed by bond insurers who are cash strapped. RBS finds itself in a peculiar predicament with low capital levels in part due to the massive acquisition of ABN-Amro in 2007, which ate up a lot of its cash. RBS's Tier 1 Capital Ratio is 4.5%, (the number regulators look for to determine a bank's financial strength) which is the lowest of any British bank and falls under the threshold where regulators can intervene and force banks to recapitalize.

Alliance Data Sues Blackstone For $170 Million "Breakup Fee"

April 21, 2008

Analysis of:Blackstone Says Alliance Data Lawsuit Spurious | today.reuters.com

Blackstone Capital Partners V L.P. may have had a case of "buyer's remorse" with its $7.8 billion deal including the assumption of certain debt of ADS. The deal valued ADS at $81.75 a share, representing a premium of about 30% over ADS's closing price of $62.96 on 5.16.07. However, since that time ADS's share price has fallen to $52.84 a share as of 4.18.08. ADS is alleging that Blackstone "refused to accept reasonable and customary regulatory requirements and prolonged negotiations with the OCC," which resulted in a breach of the deal. ADS is seeking the $170 million "breakup fee" Blackstone agreed to when it entered into the deal with ADS on 5.17.07. The deal was expected to close by year-end 2007, however, due to lack of liquidity at Blackstone, the deal was delayed for a second time and ADS is suing Blackstone for "breach of contract." The deal was touted as a marriage amongst a leader in card processing with Blackstone's investment expertise would create a powerful partnership.

Is 2008 The Tipping Point For Mobile Banking In the U.S.?

April 21, 2008

Analysis of:Online Banking Is Old News. Hello Mobile! | www.emarketer.com

The demand for mobile banking is growing and over the next 4-5 years, m-banking and m-payments will drive the boom in demand for wireless payments and banking. Banks, processors, card networks and mobile carriers are pushing two types of transactions with mobile devices, m-banking and m-commerce. The m-banking segment is projected to  grow to $50 billion by 2012 and m-payment transactions volumes will surpass $36 billion by 2012. Banks and credit unions have launched pilot programs to determine if SMS-Short Messaging Service, NFC-Near Field Communication or WAP-Wireless Application Protocol is the "killer application" for m-transactions. Consumers are interested in m-banking transactions that allow them to check balances (61%), account history (17%), transfer funds (11%), make bill payments and P2P payments (8%), password change (2%) and m-payment transactions enable consumers to download music, ringtones, games, access the Internet and conduct transactions at the POS.  

Venture Capitalists Wallets Feel the Strain Of A Slowdown In 1Q08

April 21, 2008

Analysis of:Venture Capitalists Invest Less In First Quarter | www.reuters.com

The Internet, Biotech and Cleantech are the sectors that benefited the most from venture capitals (VC) investments in 1Q08, despite a drop in VC investments to $7.1 billion in 1Q08. The economic slowdown has caused VC's to all but close their wallets to IPOs and M&As, which is the two most common avenues VC firms use to cash in on their investments. In an attempt to put a positive spin on the latest data, VC experts are saying that "investment activity still remains relatively high compared to the last economic slowdown in 2001." Seed/startup financing totaled $1.64 billion during 1Q08, however, its down from the $2.24 billion in seed/startup deals from 4Q07. VC's invested over $29 billion in total deals in 2007, which marked the highest yearly investment total since 2001. As in 1Q08, 2007 record investment levels by VCs were in the "Cleantech, Biotech and Internet specific companies, however, in 1Q08, VC's pulled back a bit as they too fell the strain of an economic slowdown.

Will M&A Activity Flourish or Stall In 2008?

April 14, 2008

Analysis of:Fund Managers See Potential Bounce In M&A Activity | www.reuters.com

Market volatility, lack of liquidity and banks' unwillingness to take on more risks has hampered global M&As activity in 1Q08. Global M&A deals have tumbled to a four year low from $962 billion down to $661 billion. The private equity sector which is known for "over the top" blockbuster deal making, saw a 77% slump in the global value of deals in 1Q08 from $195 billion down to $43.5 billion. In 1Q08 the Top M&A deal makers by value was Goldman Sachs, Citigroup, Lehman Brothers, Morgan Stanley, UBS, China International Capital, Credit Suisse, Merrill Lynch, JP Morgan, and HSBC Holdings, with M&A deals total value exceeding $131 billion. Because liquidity is scarce some M&A deals have stalled, fell through or are log jammed. 2007 was a record year for global M&A deals. Private equity's share of M&As grew substantially; however, 1Q08 data suggest that M&A deals in the private equity sector may have reached its peak after years of record growth.

Check 21 Spinoff: Back-Office Conversion (BOC) E-Check Volumes To Grow In 2008 & Beyond

April 14, 2008

Analysis of:Bigger Volume Jumps Are in Store for BOC E-Checks, NACHA Says | www.digitaltransactions.net

Another spin-off product of the Check 21 Act, Back-Office Conversion (BOC) launched in March 2007 and one year out of the gate, BOC is viewed as a more user-friendly electronic check conversion tool than POP (Point-of-Purchase) transactions, because POP requires that all or most of the merchant's checkout lanes be equipped with check scanners, which are expensive and because checks are returned to the customer during the sale, which slows down the checkout process. In contrast, BOC checks can be converted in the back-office, which speeds up the checkout time and eliminates the need for check scanners at the register. In 4Q07, BOC transactions totaled 3,083,682, which was a 266% increase from 3Q07 with 840,743 transactions. Total BOC transactions in 2007 was 4,189,465, representing three quarters of transaction volumes. Although uptake has been slow because merchants and banks had to put the infrastructure in place to process BOC transactions, BOC is poised for growth in 2008.

Pay By Touch Fades To Black After Chapter 11 Bankruptcy and Contentious Boardroom Battles

April 10, 2008

Analysis of:Pay By Touch Fades into History As Lenders Buy Core Assets | www.digitaltransactions.net

Pay By Touch fades to black after filing Chapter 11 Bankruptcy reorganization in December 2007 and enduring contentious boardroom battles to decide the fate of the company. Pay By Touch used biometrics to authenticate consumers at the POS (Point-of-Sale) for secure check cashing and ACH based purchases. Pay By Touch was successful at bringing biometric technology to the retail payments space, however, processing fingerprint payments didn't take off as expected and the once POS (Point-of-Sale) biometric payments leader officially closes shop. Pay By Touch grew primarily through acquisitions with the help of hedge funds and venture capitalists and went on to raise over $300 million to acquire at least six companies between 2005-2007, however, the company still needed more cash to fund operations. Pay By Touch's owners was also some of its biggest creditors. In court filings Pay By Touch indicated it owed its 30 largest unsecured creditors over $39 million.

As Check Volumes Plummet The Fed Speeds Up Infratructure Changes

April 8, 2008

Analysis of:Plunging Check Volumes Spur Fed to Speed up Downsizing Efforts | www.digitaltransactions.net

Since the passage of the Check 21 Act in October 2004, significant changes have occurred in traditional check processing. Banks, credit unions, image networks and the Federal Reserve are working to build the infrastructure to transition banks and credit unions to 100% electronic check imaging/exchange from traditional check processing, which could save banks and credit unions as much as $2 billion annually by reducing transportation costs, float time, check fraud and check processing costs. Additionally, consumers' shift in payment preferences from cash and checks to e-Payments has accounted for over 66% growth of all noncash payments in 2006, contributing to the sharp decline in check volumes annually. Check volumes began declining in 1995, when approximately 49.5 billion checks were paid. ACH payments has also trumped check payments as ACH e-Check conversion programs has expanded with billers and merchants who convert checks at the POS (Point-of-Sale) and POP (Point-of-Purchase).

CITGroup Closes Its Wallet To Student Lending

April 8, 2008

Analysis of:CIT Ceases Student Loan Originations | www.bloomberg.com

CIT Group drew down emergency credit lines totaling $7.3 billion in March 2008, after being cut off from customary sources of cash, forcing CIT to scrap its government-backed student loan program on 4.3.08. Due to its weak position, CIT may be a prime takeover target. The lack of investor demand has made it harder for student lenders such as CIT to raise money to finance their operations. In 4Q07, CIT reported a $302.5 million "goodwill impairment" charge against its student loan division, which reflected an erosion in the value of the business. New legislation was enacted in 2007 that slashed private lending subsidies by about $20 billion and higher costs to securitize assets for student loans proved to be less profitable for CIT. CIT has also offloaded some of its riskier operations including mortgage and private student lending. To add salt to CIT's wounds, the NY Attorney General has subpoenaed CIT's "Student Loan Express,"  for allegedly mailing fake checks and rebates.

Writedowns At Global Banks Has Topped $292 Billion; Leading To Record Job Losses

April 7, 2008

Analysis of:Lehman Sees Banks, Others Writing Down $400 billion | www.reuters.com

Writedowns at global banks has surpassed $291 billion and the "writedown" meter continues to tick and could reach $460 billion or as high as $1.2 trillion by year-end 2008. U.S. financial institutions will account for about 40% of losses. Credit losses has prompted leveraged institutions to raise new capital of approximately $100 billion from domestic and foreign investors and the side effects is a decrease in dividend payouts and record job losses which could exceed 200,000 in 2008. Subprime writedowns from leveraged institutions include UBS's $19 billion writedown; Citigroup $18 billion; Merrill Lynch 14.1 billion; Morgan Stanley $9.4 billion; Deutsche Bank $7.1 billion; HSBC $3.4 billion; JP Morgan $3.2 billion; Bear Stearns $3.2 billion; BofA $3.0 billion; Barclays $2.6 billion; RBS $4.1 billion; Freddie Mac $2 billion; Credit Suisse $1 billion and Paribas $197 million. It's too soon to determine if the markets has bottomed out and 3Q08 & 4Q08 will be the litmus test. 

National City Corporation Courted By Suitors KeyCorp & Fifth Third BanCorp

April 4, 2008

Analysis of:National City in Talks With Fifth Third-Sources | www.reuters.com

National City Corporation (NCC) share price was up 6% on 4.3.08 on news that crosstown rival KeyCorp and cross-state Fifth Third BanCorp may be courting NCC for a possible merger and/or acquisition, however, this could be a bad time to sell due to current market conditions. NCC may need to do some additional house cleaning before considering a possible sale. NCC earned only $314 million in 2007, which is a sharp decline from the $2.3 billion it pulled in during 2006. The weak position of NCC and its suitors KeyCorp and Fifth Third BanCorp may not result in the best price for NCC's shareholders. NCC's suitors have been mulling over NCC's books for weeks and either potential buyer would need to be comfortable with NCC's residential real estate portfolio and would also be willing to pay a fair price, without months and months of due diligence. NCC is scheduled to report its 1Q08 earnings soon and could be interested in inking a deal before reporting earnings for 1Q08.

UBS's Chairman Steps Down Amid $19 Billion Writedown; Announces $14.8 Billion Rights Issue

April 4, 2008

Analysis of:UBS In Capital Hike After Huge Loss, Chairman Goes | www.reuters.com

At UBS's Annual Shareholders Meeting the topics of discussion included UBS's $19 billion writedown, its $14.8 billion rights issue to raise capital and the replacement of Chairman Ospel by UBS's current Legal Counsel, Peter Kurer. UBS's huge bet on subprime investments has led to the largest bank writedown so far and UBS has moved to segregate the bulk of its subprime related investments via a mortgage escape route to reduce its exposure and shield its core businesses. UBS's subprime troubles led to its first loss in 2007, since UBS first became a bulge-bracket firm about 10 years ago. UBS's $14.8 billion rights issue should bolster their capital base so they can get lending again and plug a hole in its balance sheet due to the $19 billion writedown in 1Q08. Under intense pressure Chairman Ospel reversed his decision to seek re-election at the Annual General Meeting on April 23, 2008, even though Ospel contended that he was the "best placed person to rescue UBS." 

Sovereign Wealth Funds Up 18% In 2007 to $3.3 Trillion

April 1, 2008

Analysis of:Sovereign funds to reach $10 tln by 2015 | www.reuters.com

Sovereign Wealth Funds (SWF) grew by 18% in 2007, with a global share of 36% and early projections suggest SWFs could grow to $5 trillion by 2010. In 2007, SWFs invested $49 billion in M&A deals, which is an increase of 165%. Russia, Asia and the Middle East has played a key role in bailing out banks and other businesses from the escalating subprime woes in the U.S. and Europe. GIC, the investment arm of the Singapore Government invested $8.9 billion into UBS in December 2007 and Singapore based Temasek rescued Merrill with a $5 billion investment. Other benefactors of SWFs include a $5 billion investment into Morgan Stanley by China Investment Corp. and Abu Dhabi's SWF invested $7.5 billion into Citigroup in November 2007. During the first three months of 2008, SWFs invested more than $24 billion in the U.S., Europe and the U.K. and could exceed 2007 investment totals, with plans to add roughly $1 trillion or more in sovereign investments each year over the next three years.

Retail Banks Must Upgrade Outdated Core Banking Systems To Grow

March 31, 2008

Analysis of:Top Tier Bonanza In Store For Core Banking Vendors | www.finextra.com

"Innovate or die" is a common phrase tossed around IT Departments as they determine how to allocate their budget dollars towards data security, regulatory compliance, customer centric projects and front-office applications. Core banking systems are running 24/7 to support internet banking, global operations and real-time transactions via the ATM, Internet, phone, debit and credit cards and mobile banking. Many large Tier 1 banks with assets greater than $631 billion are running homegrown solutions and taking another look at solutions from vendors as their old systems show the strain of many years of maintenance.  Old tech is slowing the flow of communications between the "core" and other systems, which is making new product development cumbersome.  Tier 1 banks will increase their IT budget by 10% in 2008; Tier 2 banks with assets between $158-$631 billion will make the largest IT investments of 11-30%. Global banks IT spending is projected to surpass $351 billion in 2008.

Banks Charged Over $36 Billion In ATM & Overdraft Fees In 2007 to Boost Revenues

March 31, 2008

Analysis of:Banks Boost Fees for ATMs, Overdrafts | www.smartmoney.com

Banks boosted revenues by charging over $36 billion in ATM and Overdraft fees in 2007. Banks and credit unions are netting a stream of fee revenue from ATM and debit transactions in ATM and overdraft fees as consumers continue to pay steeper penalties and fees for not having sufficient funds in their checking account or when they use another bank's ATM to withdraw cash. Debit card transactions at the POS (Point-of-Sale) and ATM transactions trigger over 43% of overdrafts, while paper checks trigger 27% of overdrafts and banks and credit unions are charging fees for each overdraft occurrence and raking in huge fee revenue at the same time. As recent as 2004, 80% of banks declined debit and ATM transactions without charging a fee when consumers' didn't have sufficient funds in their account, however, this trend has shifted and banks and credit unions now charge an overdraft fee to generate fee revenue when consumers' overdraw their accounts when conducting ATM & debit transactions.

"V" Is For Visa's Victorious $18 Billion IPO

March 19, 2008

Analysis of:Visa Raises $17.9B in Largest US IPO | biz.yahoo.com

Visa beats expectations to raise $17.9 billion in its IPO and makes the record books as the largest U.S. IPO, amidst a shaky US financial market. Visa's long awaited IPO sparked a great deal of interest from investors  seeking a potential growth opportunity amid a bearish economic climate. In 2006, Visa's global consumer volume surpassed 59 billion transactions valued at $4.4. trillion. Approximately $828 billion of this volume occurred in the US and trends show volume is up by 14% over 2005 and continues upward. Visa is hoping that consumers' will continue to bring their Visa debit and credit cards for everyday purchases as higher transaction volumes and higher transaction fees are expected to drive Visa's growth over the next 5-8 years and Visa plans to capitalize on the trend of consumers shifting their payment preferences from cash and checks to debit and credit cards. Visa and MasterCard has been the biggest drivers of consumers' shifting from paper to plastic purchases.

MasterCard Appeals European Commision Ruling to Avoid Losing Market Share & Cross-Border Volume In Interchange Fees

March 7, 2008

Analysis of:MasterCard Files Appeal of European Commission Decision | www.paymentsnews.com

MasterCard Europe filed an appeal of the European Commission's (EC) ruling that its non-negotiable interchange fees for cross-border transactions violated EC Treaty regulations. The EC's investigation found that interchange fees MasterCard charges on cross-border Maestro and MasterCard transactions violate European Union rules of fair competition and the fees didn't provide any efficiencies to the consumer or the economy. Roughly 45% of European payments cards carry the MasterCard or Maestro logo and MasterCard's full year cross-border volumes increased by 21.1% in 2007 and processed transactions increased by 16.2% to $18.8 billion and gross dollar volume growth increased by 14.4% to $2.3 trillion. With the potential loss of cross-border transaction volume and a loss in market share, MasterCard couldn't afford to let the European Commission's ruling stand without challenging the ruling. If the EC's ruling stands on appeal, European consumers could save about $14 billion annually.

Chase Expands Surcharge Free ATM Access At Hess Express Gas Stations In NY & NJ

March 7, 2008

Analysis of:Chase in ATM Branding Deal With Hess Express Gas Stations | www.finextra.com

"Chase What Matters" is Chase's new tagline in its national ads. Chase's customers' are saying "surcharge free ATM access" is what matters to them, which is why Chase is expanding its ATM branding deal with Cardtronics to install Chase branded ATMs at Hess Express Gas Stations in NY and NJ. Surcharge fees have continued to rise since 1996 when the average surcharge fee was only $0.45 cents. The $2.00 surcharge fee is the most common, however, in the last year some banks have raised their surcharge fees to as high as $3.00 for non-bank customers. As of July 2007, U.S. consumers paid over $4.4 billion in ATM fees. Chase's ATM branding deal with Cardtronics is a great business case of how a bank can expand its ATM network without the investment of building more branches or locate prime space to install ATMs. Cardtronics owns and operates the machines and Chase's customers' gain "surcharge free" access at Duane Reade in NY, NJ & CT and now at Hess Express Gas Stations in NY & NJ.

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