(RTTNews) - Concerns about the pace of inflation have continued to ease on Tuesday following the release of the Department of Labor's report on consumer prices in the month of April. The report showed that prices rose a little less than economist had expected
The Labor Department said its consumer price index rose 0.4 percent in April following a 0.6 percent increase in March. The increase came in slightly below economist estimates of a 0.5 percent increase.
A significant increase in energy prices contributed to the increase in consumer prices, with energy prices rising 2.4 percent in April after surging up 5.9 percent in March. The rise in energy prices also contributed to a 1.2 percent increase in transportation costs.
The continued increase in energy prices was partly due to a notable increase in gasoline prices, which rose 4.7 percent in April following a 10.6 percent increase in the previous month.
The report also showed that the core consumer price index, which excludes food and energy prices, edged up 0.2 percent in April after rising 0.1 percent in March. Economists had expected a 0.2 percent increase.
The release of the consumer price data comes on the heels of last week's report on April producer prices, which showed a slightly bigger than expected 0.7 percent increase in prices. However, the report also showed that core producer prices were unchanged for the second consecutive month.
The relatively tame inflation data has helped to ease some of the recent concerns about the pace of inflation and generated some optimism that the Federal Reserve might consider lowering interest rates in the near future.
While the Federal Reserve has acknowledged a slowdown in the pace of economic growth, it has said that inflation failing to moderate as expected remains its predominant policy concern. The Fed will make its next interest rate decision after a meeting in late June.
In other economic news, the Federal Reserve Bank of New York released its report on business activity in the New York manufacturing sector in the month of May on Tuesday, showing that the pace of growth in the sector accelerated slightly less than expected.
The report showed that the New York Fed's general business conditions index rose to 8.03 in May from 3.80 in April, with a positive reading indicating growth in the sector. Economists had expected the index to rise to 9.0.
The accelerated pace of growth in the sector was partly due to faster new orders and shipment growth. The new orders index rose to 8.02 in May from 3.94 in April, while the shipments index rose to 14.13 from 8.66.
There was also some improvement in employment, with the number of employees index rising to 9.67 in May from 5.42 in the previous month.
At the same time, the report showed a mixed inflation picture, as the prices paid index fell to 34.44 in May from 40.48 in April, while the prices received index rose to 15.56 from 7.14.
The New York Federal Reserve also said that there was some improvement in the outlook for the next six months, with the future general business conditions index rising to 49.79 in May from 33.85 in the previous month.
Tuesday, May 15, 2007
Tuesday, May 8, 2007
Deutsche Bank Profit Rises 30% on Securities Unit
May 8 (Bloomberg) -- Deutsche Bank AG, Germany's biggest bank, said first-quarter profit jumped 30 percent on record earnings from its securities unit.
Net income rose to 2.12 billion euros ($2.89 billion), or 4.28 euros per share, from 1.64 billion euros, or 3.11 euros, a year earlier, the Frankfurt-based bank said today. Profit topped the highest estimate of 16 analysts surveyed by Bloomberg.
Deutsche Bank, led by Chief Executive Officer Josef Ackermann, outpaced European rivals UBS AG and Credit Suisse Group as record revenue from sales and trading spurred investment banking earnings. Consumer banking and asset management profit fell and earnings growth trailed New York-based firms Morgan Stanley and JPMorgan Chase & Co.
``Conditions for investment banking are almost perfect,'' said Patrick Lemmens, who helps manage about $3.5 billion, including Deutsche Bank shares, at ABN Amro Asset Management in Amsterdam. ``The good conditions that we saw in the first quarter are continuing in the second.''
Deutsche Bank shares declined 93 cents, or 0.8 percent, to 115.37 euros at 1:02 p.m. in Frankfurt, valuing the company at about 60.6 billion euros. The stock gained 16 percent in the past year, compared with a 20 percent rise at Credit Suisse and a 1.7 percent increase at UBS.
Sales and Trading
Pretax profit at the investment bank, run by Anshu Jain and Michael Cohrs, rose 10 percent to 2.2 billion euros in the quarter, above the 2.07 billion euros estimated by analysts.
Revenue from sales and trading of stocks and bonds increased 16 percent to 5.1 billion euros, making Deutsche Bank the second biggest in trading on Wall Street after New York-based Goldman Sachs Group Inc. Revenue from underwriting and merger advice rose 17 percent to 797 million euros.
Consumer banking profit fell 3 percent to 293 million euros on costs to integrate Berliner Bank and Norisbank, purchased last year, while earnings from asset and wealth management dropped 19 percent to 188 million euros on lower performance fees in the real estate business.
``The lower-than-expected profits in the non-investment banking divisions may take some shine off the very strong investment banking results,'' Credit Suisse analyst Ivan Vatchkov said in a note to clients. ``This may revive investor concerns that Deutsche is overly dependent on investment banking.'' He has an ``outperform'' rating on the stock.
Revenue and Costs
Earnings were boosted by gains at the corporate investments division, where pretax profit more than doubled to 305 million euros on the sale of a 0.8 percent stake in Fiat SpA and a holding in Deutsche Interhotel Holding.
Total revenue rose 20 percent to 9.58 billion euros, exceeding analysts' estimates of 8.6 billion euros. Costs jumped 17 percent to 6.32 billion euros, boosted by higher performance- related compensation and acquisitions. That exceeded the 5.76 billion-euro estimate of analysts in the survey.
UBS's net income was hurt by losses tied to the U.S. subprime mortgage market at Dillon Read Capital Management, the hedge fund run by 50-year-old former investment-banking chief John Costas. UBS will pay $300 million to shut the fund. Credit Suisse, Switzerland's second-largest bank, generated record revenue from bonds and stock trading, making up for the sale of the Winterthur insurance division.
Deutsche Bank's profit growth lagged behind some of its largest U.S. competitors. Morgan Stanley, the second-biggest securities firm by market value, reported a 70 percent surge in profit. Earnings at JPMorgan, the No. 3 U.S. bank, jumped 55 percent in the quarter.
Lower Quality?
``The quality of earnings is lower than what we saw from Credit Suisse and UBS,'' because of greater dependence on trading, said Stefan Raetzer, who helps manage about $26.4 billion in equities at Allianz Global Investors. ``That is mirrored in the share valuation, as Deutsche Bank trades at a 10 to 20 percent discount to the other two banks.''
Deutsche Bank's shares trade at 8.2 times earnings per share, the lowest ratio among its nine biggest competitors, which include New York-based Goldman and UBS, the largest money manager. The average price to earnings ratio for Deutsche Bank's competitors is 11.5.
Takeover Battle
Deutsche Bank's securities unit, the biggest in Europe by revenue, could make it an attractive merger or acquisition target for a large European consumer bank, some analysts and investors said. Such a deal would boost the bank's ability to invest in its business and take more risk, Merrill Lynch & Co. analyst Stuart Graham wrote in an April 23 note to clients.
``If other European banks are pairing off, is Deutsche content with its broker dealer-centric model once and for all?'' Graham wrote. ``It may not be able to change its mind at a later date, since its few potential partners could have already done other deals.''
Ackermann, 59, said as recently as February that a ``transformational'' merger is not on the agenda. That was before the world's biggest banking takeover battle erupted over ABN Amro Holding NV, the largest Dutch bank. Barclays Plc, Britain's No. 3 lender, and a trio of banks led by Royal Bank of Scotland Group Plc are vying for control of Amsterdam-based ABN Amro.
``Consolidation of our industry, including cross-border mergers in Europe, may also create changes in the competitive landscape,'' Ackermann said in a letter to shareholders today. ``Deutsche Bank is well equipped to deal with these factors as our strategic position is strong,'' he said, reiterating that the bank will focus on internal growth and smaller acquisitions.
2008 Targets
Deutsche Bank aims to raise pretax profit, excluding one- time gains and costs, to 8.4 billion euros in 2008 by expanding consumer banking and asset management, Chief Financial Officer Anthony Di Iorio reiterated on a conference call with analysts today. That would mean an increase of about 5 percent from 2006 earnings.
``I wouldn't characterize it as aggressive or conservative, but rather as our stated target,'' Di Iorio said. He also repeated that the bank expects a pretax profit contribution of about 300 million euros in 2008 from acquisitions, including Berliner Bank and Norisbank, based in Nuremberg.
Net income rose to 2.12 billion euros ($2.89 billion), or 4.28 euros per share, from 1.64 billion euros, or 3.11 euros, a year earlier, the Frankfurt-based bank said today. Profit topped the highest estimate of 16 analysts surveyed by Bloomberg.
Deutsche Bank, led by Chief Executive Officer Josef Ackermann, outpaced European rivals UBS AG and Credit Suisse Group as record revenue from sales and trading spurred investment banking earnings. Consumer banking and asset management profit fell and earnings growth trailed New York-based firms Morgan Stanley and JPMorgan Chase & Co.
``Conditions for investment banking are almost perfect,'' said Patrick Lemmens, who helps manage about $3.5 billion, including Deutsche Bank shares, at ABN Amro Asset Management in Amsterdam. ``The good conditions that we saw in the first quarter are continuing in the second.''
Deutsche Bank shares declined 93 cents, or 0.8 percent, to 115.37 euros at 1:02 p.m. in Frankfurt, valuing the company at about 60.6 billion euros. The stock gained 16 percent in the past year, compared with a 20 percent rise at Credit Suisse and a 1.7 percent increase at UBS.
Sales and Trading
Pretax profit at the investment bank, run by Anshu Jain and Michael Cohrs, rose 10 percent to 2.2 billion euros in the quarter, above the 2.07 billion euros estimated by analysts.
Revenue from sales and trading of stocks and bonds increased 16 percent to 5.1 billion euros, making Deutsche Bank the second biggest in trading on Wall Street after New York-based Goldman Sachs Group Inc. Revenue from underwriting and merger advice rose 17 percent to 797 million euros.
Consumer banking profit fell 3 percent to 293 million euros on costs to integrate Berliner Bank and Norisbank, purchased last year, while earnings from asset and wealth management dropped 19 percent to 188 million euros on lower performance fees in the real estate business.
``The lower-than-expected profits in the non-investment banking divisions may take some shine off the very strong investment banking results,'' Credit Suisse analyst Ivan Vatchkov said in a note to clients. ``This may revive investor concerns that Deutsche is overly dependent on investment banking.'' He has an ``outperform'' rating on the stock.
Revenue and Costs
Earnings were boosted by gains at the corporate investments division, where pretax profit more than doubled to 305 million euros on the sale of a 0.8 percent stake in Fiat SpA and a holding in Deutsche Interhotel Holding.
Total revenue rose 20 percent to 9.58 billion euros, exceeding analysts' estimates of 8.6 billion euros. Costs jumped 17 percent to 6.32 billion euros, boosted by higher performance- related compensation and acquisitions. That exceeded the 5.76 billion-euro estimate of analysts in the survey.
UBS's net income was hurt by losses tied to the U.S. subprime mortgage market at Dillon Read Capital Management, the hedge fund run by 50-year-old former investment-banking chief John Costas. UBS will pay $300 million to shut the fund. Credit Suisse, Switzerland's second-largest bank, generated record revenue from bonds and stock trading, making up for the sale of the Winterthur insurance division.
Deutsche Bank's profit growth lagged behind some of its largest U.S. competitors. Morgan Stanley, the second-biggest securities firm by market value, reported a 70 percent surge in profit. Earnings at JPMorgan, the No. 3 U.S. bank, jumped 55 percent in the quarter.
Lower Quality?
``The quality of earnings is lower than what we saw from Credit Suisse and UBS,'' because of greater dependence on trading, said Stefan Raetzer, who helps manage about $26.4 billion in equities at Allianz Global Investors. ``That is mirrored in the share valuation, as Deutsche Bank trades at a 10 to 20 percent discount to the other two banks.''
Deutsche Bank's shares trade at 8.2 times earnings per share, the lowest ratio among its nine biggest competitors, which include New York-based Goldman and UBS, the largest money manager. The average price to earnings ratio for Deutsche Bank's competitors is 11.5.
Takeover Battle
Deutsche Bank's securities unit, the biggest in Europe by revenue, could make it an attractive merger or acquisition target for a large European consumer bank, some analysts and investors said. Such a deal would boost the bank's ability to invest in its business and take more risk, Merrill Lynch & Co. analyst Stuart Graham wrote in an April 23 note to clients.
``If other European banks are pairing off, is Deutsche content with its broker dealer-centric model once and for all?'' Graham wrote. ``It may not be able to change its mind at a later date, since its few potential partners could have already done other deals.''
Ackermann, 59, said as recently as February that a ``transformational'' merger is not on the agenda. That was before the world's biggest banking takeover battle erupted over ABN Amro Holding NV, the largest Dutch bank. Barclays Plc, Britain's No. 3 lender, and a trio of banks led by Royal Bank of Scotland Group Plc are vying for control of Amsterdam-based ABN Amro.
``Consolidation of our industry, including cross-border mergers in Europe, may also create changes in the competitive landscape,'' Ackermann said in a letter to shareholders today. ``Deutsche Bank is well equipped to deal with these factors as our strategic position is strong,'' he said, reiterating that the bank will focus on internal growth and smaller acquisitions.
2008 Targets
Deutsche Bank aims to raise pretax profit, excluding one- time gains and costs, to 8.4 billion euros in 2008 by expanding consumer banking and asset management, Chief Financial Officer Anthony Di Iorio reiterated on a conference call with analysts today. That would mean an increase of about 5 percent from 2006 earnings.
``I wouldn't characterize it as aggressive or conservative, but rather as our stated target,'' Di Iorio said. He also repeated that the bank expects a pretax profit contribution of about 300 million euros in 2008 from acquisitions, including Berliner Bank and Norisbank, based in Nuremberg.
Monday, May 7, 2007
US Dollar Bought Heavily by Commercial Hedgers is USD Bullish
With commercial hedgers long the largest amount of US dollars since early December, a multi-week low in the Dollar Index is close. 56.7% of the Dollar Index is the Euro, so a multi-week high is close to being established, if not already in place, in the EURUSD.
Friday, May 4, 2007
U.S. Stocks Advance on Takeover Speculation overtakes Employment Report
May 4 (Bloomberg) -- U.S. stocks rose for a fourth day after a report that Microsoft Corp. wants to buy Yahoo Inc. spurred speculation takeovers will accelerate after $69.5 billion of announced deals this week.
Shares of Yahoo, owner of the most-visited U.S. Web site, soared after the New York Post reported that Microsoft, the world's biggest software company, hired Goldman Sachs Group Inc. to advise on a possible deal. Reuters Group Plc, the biggest publicly traded provider of financial data, said it received a takeover approach from an unidentified company.
Mergers and acquisitions have helped send the stock market toward its fifth straight week of gains. Stocks also gained after the Labor Department said the U.S. economy added a fewer-than- forecast 88,000 jobs last month, boosting odds the Federal Reserve will cut interest rates.
``M&A will continue through the year,'' said Andrew Seibert, who helps manage $900 million at Stewart Capital Management in Pittsburgh. ``There's a lot of liquidity and these companies are flush with cash. It's one of the drivers for the market.''
The Standard & Poor's 500 Index added 4.45, or 0.3 percent, to 1506.84 as of 10:06 a.m. in New York. The Dow Jones Industrial Average advanced 15.44, or 0.1 percent, to 13,256.82. The Nasdaq Composite Index increased 6.72, or 0.3 percent, to 2572.18.
Better-than-forecast gains in worker productivity and the U.S. services industry yesterday pushed the Dow average to a third straight record and the S&P 500 above 1500 for the first time since September 2000.
For the week, the S&P 500 has risen 0.9 percent, the Dow average has advanced 1.1 percent and the Nasdaq has increased 0.6 percent.
Profit Growth
So far, 401 members of the S&P 500, or 80 percent, have reported average first-quarter profit growth of 12 percent. Analysts have upgraded their estimates at least twice since the start of the earnings season. They now expect S&P 500 companies increased profits by 9.4 percent in the period.
The 88,000 increase in employment last month followed a 177,000 gain in March that was smaller than previously estimated, according to the Labor Department. The jobless rate rose to 4.5 percent from 4.4 percent, which matched a five-year low.
The report also showed that average hourly earnings grew at a rate that trailed economists' forecasts.
Yields on interest-rate futures declined as traders priced in a higher likelihood the Fed will lower its target for the overnight lending rate between banks this year. Policy makers meet next week to decide on interest rates.
About five stocks rose for every three that fell on the New York Stock Exchange. Some 115 million shares changed hands on the Big Board, 3.4 percent less than the same time a week ago.
Yahoo, Microsoft
Yahoo jumped $4.62, or 16 percent, to $32.80, while Microsoft slid 35 cents to $30.62. An agreement between the two companies would create a dominant force on the Internet and raise the combined companies' share of the search advertising market to 27 percent compared with 65 percent for Google Inc. The New York Post report cited unidentified bankers.
Tom Brookes, a Brussels-based spokesman for Microsoft, had no immediate comment on the report. David Sawday, a London-based spokesman for Yahoo, declined to comment, saying the company doesn't discuss market speculation.
Reuters American depositary receipts, each representing six shares, surged $15.09, or 26 percent, to $74.01. Shares of the 156-year-old company had jumped 8 percent before the statement on speculation about an offer from Thomson Corp., the Canadian owner of the Westlaw legal database and TradeWeb financial services.
Companies around the world have announced some $1.8 trillion in mergers and acquisitions this year, according to data compiled by Bloomberg. Dealmaking totaled $3.68 trillion for all of last year.
Starbucks climbed 14 cents to $31.76. The world's largest chain of coffee shops said second-quarter net income increased to 19 cents a share from 16 cents a year earlier, matching analysts' estimates.
Crocs Inc. soared $11.27 to $68.68. The company said first- quarter earnings almost quadrupled as demand for the colorful line of casual shoes increased. Profit of 61 cents a share topped the 49-cent average estimate from analysts surveyed by Bloomberg.
Kodak Drops
Eastman Kodak Co., the world's largest photography company, dropped 54 cents to $25.43 after posting a wider-than-expected first-quarter loss as it spent to eliminate jobs and shut factories. The net loss of 53 cents a share compared with analysts' projections of a 3-cent loss.
Sears Holdings Corp. declined $7.03 to $181.29. The largest U.S. department-store company said first-quarter domestic same- store sales dropped 2.4 percent as consumers bought fewer home appliances because of a slowing U.S. housing market and increased competition.
Shares of Yahoo, owner of the most-visited U.S. Web site, soared after the New York Post reported that Microsoft, the world's biggest software company, hired Goldman Sachs Group Inc. to advise on a possible deal. Reuters Group Plc, the biggest publicly traded provider of financial data, said it received a takeover approach from an unidentified company.
Mergers and acquisitions have helped send the stock market toward its fifth straight week of gains. Stocks also gained after the Labor Department said the U.S. economy added a fewer-than- forecast 88,000 jobs last month, boosting odds the Federal Reserve will cut interest rates.
``M&A will continue through the year,'' said Andrew Seibert, who helps manage $900 million at Stewart Capital Management in Pittsburgh. ``There's a lot of liquidity and these companies are flush with cash. It's one of the drivers for the market.''
The Standard & Poor's 500 Index added 4.45, or 0.3 percent, to 1506.84 as of 10:06 a.m. in New York. The Dow Jones Industrial Average advanced 15.44, or 0.1 percent, to 13,256.82. The Nasdaq Composite Index increased 6.72, or 0.3 percent, to 2572.18.
Better-than-forecast gains in worker productivity and the U.S. services industry yesterday pushed the Dow average to a third straight record and the S&P 500 above 1500 for the first time since September 2000.
For the week, the S&P 500 has risen 0.9 percent, the Dow average has advanced 1.1 percent and the Nasdaq has increased 0.6 percent.
Profit Growth
So far, 401 members of the S&P 500, or 80 percent, have reported average first-quarter profit growth of 12 percent. Analysts have upgraded their estimates at least twice since the start of the earnings season. They now expect S&P 500 companies increased profits by 9.4 percent in the period.
The 88,000 increase in employment last month followed a 177,000 gain in March that was smaller than previously estimated, according to the Labor Department. The jobless rate rose to 4.5 percent from 4.4 percent, which matched a five-year low.
The report also showed that average hourly earnings grew at a rate that trailed economists' forecasts.
Yields on interest-rate futures declined as traders priced in a higher likelihood the Fed will lower its target for the overnight lending rate between banks this year. Policy makers meet next week to decide on interest rates.
About five stocks rose for every three that fell on the New York Stock Exchange. Some 115 million shares changed hands on the Big Board, 3.4 percent less than the same time a week ago.
Yahoo, Microsoft
Yahoo jumped $4.62, or 16 percent, to $32.80, while Microsoft slid 35 cents to $30.62. An agreement between the two companies would create a dominant force on the Internet and raise the combined companies' share of the search advertising market to 27 percent compared with 65 percent for Google Inc. The New York Post report cited unidentified bankers.
Tom Brookes, a Brussels-based spokesman for Microsoft, had no immediate comment on the report. David Sawday, a London-based spokesman for Yahoo, declined to comment, saying the company doesn't discuss market speculation.
Reuters American depositary receipts, each representing six shares, surged $15.09, or 26 percent, to $74.01. Shares of the 156-year-old company had jumped 8 percent before the statement on speculation about an offer from Thomson Corp., the Canadian owner of the Westlaw legal database and TradeWeb financial services.
Companies around the world have announced some $1.8 trillion in mergers and acquisitions this year, according to data compiled by Bloomberg. Dealmaking totaled $3.68 trillion for all of last year.
Starbucks climbed 14 cents to $31.76. The world's largest chain of coffee shops said second-quarter net income increased to 19 cents a share from 16 cents a year earlier, matching analysts' estimates.
Crocs Inc. soared $11.27 to $68.68. The company said first- quarter earnings almost quadrupled as demand for the colorful line of casual shoes increased. Profit of 61 cents a share topped the 49-cent average estimate from analysts surveyed by Bloomberg.
Kodak Drops
Eastman Kodak Co., the world's largest photography company, dropped 54 cents to $25.43 after posting a wider-than-expected first-quarter loss as it spent to eliminate jobs and shut factories. The net loss of 53 cents a share compared with analysts' projections of a 3-cent loss.
Sears Holdings Corp. declined $7.03 to $181.29. The largest U.S. department-store company said first-quarter domestic same- store sales dropped 2.4 percent as consumers bought fewer home appliances because of a slowing U.S. housing market and increased competition.
Wednesday, May 2, 2007
Japanese Yen Breaks 120
The USDJPY looks top heavy at current levels as evidenced by RSI bearish divergence on the hourly. Still, the resistance is not until the 78.6% of 122.17-115.14 at 120.67. With the rally from 117.60 in 5 waves, a correction is due towards the former 4th wave, which intersects with Fibonacci support at the 38.2% and 50% of 117.60-120.23 at 118.91/119.22.
MasterCard Net Rises to Record as Card Use Increases
May 2 (Bloomberg) -- MasterCard Inc., the credit-card company whose shares have more than tripled since last year's initial public offering, said first-quarter profit surged 70 percent to a record as consumers charged more purchases.
Net income rose to $214.9 million, or $1.57 a share, from $126.7 million, or 94 cents, a year earlier, the Purchase, New York-based company said in a statement. Profit at MasterCard, the No. 2 card network behind Visa International Inc., beat the $1.16 average estimate of 12 analysts surveyed by Bloomberg.
Transactions jumped 19 percent as consumers continued to switch to cash and checks from credit and debit cards. MasterCard's revenue increased 24 percent, benefiting from a March increase in U.S. retail sales that was the biggest in three months. Visa plans an IPO early next year to capitalize on consumers' growing preference for credit over cash.
``This was a very strong quarter,'' analyst Craig Maurer at Calyon Securities, the investment-banking arm of Credit Agricole SA, said in an interview. ``They had great revenue, great transaction growth, great expense control.''
Revenue rose to $915.1 million, while expenses climbed 8.2 percent to $601.2 million on costs to hire more workers and defend against lawsuits.
Shares of the company advanced to $125.06 in early trading, from $114.85 at the close yesterday on the New York Stock Exchange. They were priced at $39 in the May 2006 IPO.
`Bullish' on Prospects
MasterCard credit- and debit-card spending increased 16 percent to $509 billion on a local-currency basis, and transactions jumped to 4.2 billion, the company said.
Consumers' use of cash and checks fell to 50 percent of all payments in 2005 from 77 percent in 1995, while card use rose to 40 percent from around 21 percent, analyst Timothy Willi of A.G. Edwards & Sons Inc. wrote in a note to clients this week, citing data from the Nilson Report in Oxnard, California.
Nilson estimates that by 2010, card-based payments will account for about 56 percent of consumer payments, while cash and checks will drop to 29 percent.
``We are bullish on the long-term prospects for MasterCard,'' Willi wrote. ``Consumers, businesses and government are making cards their preferred method of payment.''
MasterCard's advertising and market-development expenses dropped to $178.5 million from $182.7 million a year earlier. Maurer at Calyon said American Express Co., which reported a 21 percent profit increase on April 19, has also cut back on marketing.
``The card companies see limited opportunities to drive any incremental business in the current market,'' Maurer said.
Profit Margin
Shares of MasterCard slid 9.7 percent on Feb. 9, the biggest drop since the IPO, after Chief Executive Officer Robert Selander declined on a conference call with analysts to forecast continued growth in profit margins.
A lawsuit accusing MasterCard of anticompetitive behavior, brought by rival card networks American Express and Discover Financial Services, ``could put downward pressure on shares,'' as could Visa's public stock offering, according to analysts at JPMorgan Chase & Co.
The lawsuit is scheduled for trial in federal court next year.
MasterCard in April 2006 began charging card issuers for all foreign transactions using U.S.-issued cards. It used to assess a fee only if it converted the related currency to U.S. dollars.
Net income rose to $214.9 million, or $1.57 a share, from $126.7 million, or 94 cents, a year earlier, the Purchase, New York-based company said in a statement. Profit at MasterCard, the No. 2 card network behind Visa International Inc., beat the $1.16 average estimate of 12 analysts surveyed by Bloomberg.
Transactions jumped 19 percent as consumers continued to switch to cash and checks from credit and debit cards. MasterCard's revenue increased 24 percent, benefiting from a March increase in U.S. retail sales that was the biggest in three months. Visa plans an IPO early next year to capitalize on consumers' growing preference for credit over cash.
``This was a very strong quarter,'' analyst Craig Maurer at Calyon Securities, the investment-banking arm of Credit Agricole SA, said in an interview. ``They had great revenue, great transaction growth, great expense control.''
Revenue rose to $915.1 million, while expenses climbed 8.2 percent to $601.2 million on costs to hire more workers and defend against lawsuits.
Shares of the company advanced to $125.06 in early trading, from $114.85 at the close yesterday on the New York Stock Exchange. They were priced at $39 in the May 2006 IPO.
`Bullish' on Prospects
MasterCard credit- and debit-card spending increased 16 percent to $509 billion on a local-currency basis, and transactions jumped to 4.2 billion, the company said.
Consumers' use of cash and checks fell to 50 percent of all payments in 2005 from 77 percent in 1995, while card use rose to 40 percent from around 21 percent, analyst Timothy Willi of A.G. Edwards & Sons Inc. wrote in a note to clients this week, citing data from the Nilson Report in Oxnard, California.
Nilson estimates that by 2010, card-based payments will account for about 56 percent of consumer payments, while cash and checks will drop to 29 percent.
``We are bullish on the long-term prospects for MasterCard,'' Willi wrote. ``Consumers, businesses and government are making cards their preferred method of payment.''
MasterCard's advertising and market-development expenses dropped to $178.5 million from $182.7 million a year earlier. Maurer at Calyon said American Express Co., which reported a 21 percent profit increase on April 19, has also cut back on marketing.
``The card companies see limited opportunities to drive any incremental business in the current market,'' Maurer said.
Profit Margin
Shares of MasterCard slid 9.7 percent on Feb. 9, the biggest drop since the IPO, after Chief Executive Officer Robert Selander declined on a conference call with analysts to forecast continued growth in profit margins.
A lawsuit accusing MasterCard of anticompetitive behavior, brought by rival card networks American Express and Discover Financial Services, ``could put downward pressure on shares,'' as could Visa's public stock offering, according to analysts at JPMorgan Chase & Co.
The lawsuit is scheduled for trial in federal court next year.
MasterCard in April 2006 began charging card issuers for all foreign transactions using U.S.-issued cards. It used to assess a fee only if it converted the related currency to U.S. dollars.
Citigroup to Buy Bisys to Expand Hedge-Fund Services
May 2 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank, agreed to buy Bisys Group Inc. for $1.47 billion to expand the services it offers hedge funds and private-equity firms.
Citigroup will pay $11.85 a share and a special dividend of 15 cents a share at closing, the New York-based bank said in a statement. Shares of Bisys, based in Roseland, New Jersey, closed yesterday at $11.47. Citigroup said it will sell Bisys's retirement and insurance units to affiliates of buyout firm J.C. Flowers & Co., making the net cost of the deal $800 million.
The acquisition may speed Citigroup's push to serve so- called alternative funds, the fastest growing segment of the asset-management industry. The bank said it can offer banking, trading and investment-banking services to Bisys's hedge-fund and private-equity clients.
Bisys ``will extend our full-service client platform and reaffirm our focus on serving the needs of high-growth markets,'' Michael Klein, co-president of Citi Markets and Banking, said in the statement.
The transaction is scheduled to close in the second half of this year and is subject to approval by Bisys shareholders and regulators in the U.S., Ireland and Bermuda. The acquisition won't affect earnings in the first year and will add to profit thereafter, Citigroup said.
Citigroup's own investment bankers advised the bank on the transaction.
New York-based J.C. Flowers, run by founder and former Goldman Sachs Group Inc. executive Christopher Flowers, specializes in taking financial-services companies private. Last month Flowers led a group of investors in agreeing to buy student-loan provider SLM Corp., known as Sallie Mae, for $25 billion.
Citigroup will pay $11.85 a share and a special dividend of 15 cents a share at closing, the New York-based bank said in a statement. Shares of Bisys, based in Roseland, New Jersey, closed yesterday at $11.47. Citigroup said it will sell Bisys's retirement and insurance units to affiliates of buyout firm J.C. Flowers & Co., making the net cost of the deal $800 million.
The acquisition may speed Citigroup's push to serve so- called alternative funds, the fastest growing segment of the asset-management industry. The bank said it can offer banking, trading and investment-banking services to Bisys's hedge-fund and private-equity clients.
Bisys ``will extend our full-service client platform and reaffirm our focus on serving the needs of high-growth markets,'' Michael Klein, co-president of Citi Markets and Banking, said in the statement.
The transaction is scheduled to close in the second half of this year and is subject to approval by Bisys shareholders and regulators in the U.S., Ireland and Bermuda. The acquisition won't affect earnings in the first year and will add to profit thereafter, Citigroup said.
Citigroup's own investment bankers advised the bank on the transaction.
New York-based J.C. Flowers, run by founder and former Goldman Sachs Group Inc. executive Christopher Flowers, specializes in taking financial-services companies private. Last month Flowers led a group of investors in agreeing to buy student-loan provider SLM Corp., known as Sallie Mae, for $25 billion.
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