US Payments: Winners and Losers in Mobile
On Thursday, Google announced Android support for “host card emulation” which places payments credentials in the cloud and allows them to be securely accessed by mobile applications including digital...
View ArticleQuick Thoughts – BAC: A Capital Tsunami
Since the Fed released guidelines for the 2014 CCAR process on November 1st, investors have expressed concern that the stress tests have been stiffened and that more capital than previously expected...
View ArticleBarclays: Swaps Compression/Central Clearing will reduce the Balance Sheet...
Derivatives compression (the restructuring of derivatives portfolios so that unwanted leverage exposure declines while target risk exposures remain within tolerance) will likely reduce industry...
View ArticleBarclays: 2016 ROE Target Achievable Given Competitive Strength of Investment...
Half of Barclay’s risk-weighted assets (RWA) are in businesses which do not meet the cost-of-equity (COE, estimated by management at 11.5%). We expect improving returns at the investment bank, together...
View ArticleCOF: Capital Generation and Digital Opportunity in Payments Can Drive 25% Upside
We expect COF to generate 2015 EPS of $7.70 (20 cents above consensus) as the payout ratio rises to ~80% corresponding to a 2015 buyback amount of $2.5 billion and reducing the average share count by...
View ArticleFIS: The MCX Opportunity for PayNet
FIS will allow merchants participating in the MCX payments system (which we expect to pilot in 2014Q1 and roll-out nationally before year-end) to accept card payments for an all-in cost of 4...
View ArticleQuick Thoughts – FIS/MCX: Access to ACH
A risk to the thesis in the attached note that FIS will offer lower-cost routing (4 cents/transaction of which 2 cents is to be paid to banks to contribute to the cost of an ACH-enabled debit) for MCX...
View ArticleBAC: Closing the Margin Gap with WFC
Over the last three years, the net interest margin at BAC has risen from 64% to 72% of that reported by WFC (with the corresponding figures being 80% and 90% if we adjust for the adverse impact of...
View ArticleImplications for Visa and FIS of Structural Change in US Debit
Given structural change in US debit, downside risks to Visa’s multiple in 2014 exceed upside risks: Growth: We expect growth estimates for network-switched bankcard debit in the US to be reset as...
View ArticleGame of Loans: Impact of Credit Tie on Competitive Dynamics in US Debit
The relative outperformance of MA versus V since end-July, when a Federal District Court ruled in favor of dual-routing for signature debit, is hard to explain. It is likely predicated on a share shift...
View ArticleBAC: Room to Run as Rising Net Interest Margin Levers over Declining Expenses...
On the last earnings call, BAC guided to a tangible ROE of 14% “as we look out over three years” based on a 1% ROA and tangible equity/assets ratio “that’s just over 7%” (7.5% in the last quarter). In...
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Quick Thoughts – V/MA: It’s the Routing Rules that Matter
On Friday, Visa rallied near 5% on oral arguments in front of an appeals court where judges appeared to support the Fed’s debit interchange cap of 21-24 cents/transaction in possible conflict with a...
View ArticleMobile Wallets: Structural Advantage of MCX over Apple, Google, PayPal, and...
Mobile wallets are on the cusp of mass adoption: the WSJ reports that AAPL is looking to allow consumers to use iOS mobile devices to pay for physical goods outside Apple stores with their iTunes...
View ArticleCOF: Guidance Conservative; Reiterate 2015 EPS of $7.70 and $90 Price Target
We view COF’s guidance for 2014 pre-provision earnings (PPE) of $9.8bn as conservative and reiterate our 2015 EPS estimate of $7.70 (versus consensus of $7.33) and our price target of $90. Consensus...
View ArticleV and MA: Quantifying Concentration and Disintermediation Risk
Conversion of the Chase consumer credit portfolio to V, which apparently had not begun in 2013, will represent a 2%+ headwind to global growth for MA in 2014 (and 6-7% headwind to US growth) assuming...
View ArticleBarclays: Expect Improved Guidance for Profitability and Leverage
With 2013 results and cost-cutting measures on Feb 11th, we expect Barclays to announce: (i) a 5-year target for a low-to-mid-teens return-on-equity replacing the current anemic target for a return in...
View ArticleQuick Thoughts: Barclays – Numbers do not Support Negative View of the...
I have rarely seen such a gap between strong management execution and negative market sentiment. Barclays stock is down nearly 7% after the full-year conference call in London this morning; the...
View ArticleBAC: Closing the Margin Gap with WFC
Over the last three years, the net interest margin at BAC has risen from 64% to 72% of that reported by WFC (with the corresponding figures being 80% and 90% if we adjust for the adverse impact of...
View ArticleImplications for Visa and FIS of Structural Change in US Debit
Given structural change in US debit, downside risks to Visa’s multiple in 2014 exceed upside risks: Growth: We expect growth estimates for network-switched bankcard debit in the US to be reset as...
View ArticleGame of Loans: Impact of Credit Tie on Competitive Dynamics in US Debit
The relative outperformance of MA versus V since end-July, when a Federal District Court ruled in favor of dual-routing for signature debit, is hard to explain. It is likely predicated on a share shift...
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