Telebanc Skyrockets on On-Line Push

American Banker, December 28, 1998 | Go to article overview

Telebanc Skyrockets on On-Line Push


By STEVEN MARJANOVIC Telebanc Financial Corp.'s stock has risen more than 300% since October as the branchless-banking pioneer racked up impressive growth.

Building on its roots in telephone-based banking, Telebanc this year increased its accounts by 138%, to 50,000; assets by 90%, to $1.9 billion; and deposits by 87%, to $1 billion.

Its stock closed at $33.125 Wednesday, up 307% from a 1998 low of $8.125 on Oct. 8.

Telebanc is embracing the Internet to rapidly expand nationally. Previously the Arlington, Va.-based bank sought deposits in its home region, luring older customers with high yields on savings accounts. With no branch network to support, it could offer one-year CD rates as high as 5.5%.

In going national, Telebanc is broadening its product menu to include no-fee checking accounts and refunds on automated teller machine fees. It also is bolstering its marketing budget, which Legg Mason Wood Walker Inc. estimated will be $11 million in 1999, compared with $5 million in 1998 and $600,000 in 1997.

The bank has developed a strong relationship with the Internet portal Yahoo, having signed a marketing and product integration deal in the third quarter and helping Yahoo to develop a Web banking center due in 1999.

"We think the Internet will provide Telebanc an incredible platform for growth and operating leverage," said Pawan Malhotra, an analyst at Legg Mason in Baltimore. He rates Telebanc a "buy" and put his 12-month price target at $42. …

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