Magazine article American Banker

4Q Earnings: TSYS: Prospect of Delinquency Rise No Concern

Magazine article American Banker

4Q Earnings: TSYS: Prospect of Delinquency Rise No Concern

Article excerpt

The problems facing banks' credit card operations probably will not hurt Total System Services Inc. and could help it, the transaction processor said.

"I don't think there's any question that card delinquencies are going to rise," Philip W. Tomlinson, TSYS' chairman and chief executive, told analysts during an earnings conference call Thursday. But, he said, banks' card losses do not carry over to TSYS.

And even if consumers tighten their spending, Mr. Tomlinson said he expects little impact on TSYS' revenue. As long as people continue to pay by card, the amount of those transactions does not matter to TSYS. "We get paid the same thing ... for a $2 transaction as we do a $20,000 transaction," he said. "Historically, we have not seen transactions slow down an awful lot. They do slow down somewhat, but certainly the bottom does not drop out."

"In some ways," slower card spending "almost helps us," Mr. Tomlinson said, because it could prompt financial companies to shop around their processing business in an effort to reduce costs, giving TSYS a chance to win new business or to sell additional products such as its fraud and collections tools. "They are just looking for better and more effective and less expensive ways of doing processing," he said.

The Columbus, Ga., company also has bundled pricing for some large accounts, so "we get the same price per active account, per month, regardless of whether they have a transaction or not," Mr. Tomlinson said. Such arrangements are good for TSYS during recessions.

TSYS reported lower earnings for the quarter and the year, which it blamed largely on one-time charges, and raised its guidance for 2008.

Revenue for the year rose 1%, to $1.8 billion, and net income fell 5%, to $237 million.

TSYS received a $65 million termination fee from Bank of America Corp. in 2006, when B of A began processing transactions for its consumer card business in-house. …

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