Wednesday, January 12, 2000
Bank One earnings may drop
Credit card unit is focus
Bloomberg News
NEW YORK — Bank One Corp., the fourth-largest U.S. bank, Tuesday said it expects earnings to fall as much as 19 percent in 2000 as it spends the year trying to turn around its slumping credit card business.
At a meeting in New York, bank executives told investors of plans to boost a stock price that has declined by half since May as they lost credit-card customers. They said troubles at the card unit, the second-biggest in the United States, wouldn't be solved until 2001.
Bank One shares closed unchanged at $30.061/4 on the New York Stock Exchange after the company said it will take a pretax charge of $725 million against fourth-quarter earnings in 1999 in part to cover job cuts and one-time losses in the card unit. The bank, based in Chicago, also said fourth-quarter 1999 results would be a penny short of estimates.
Bank One has 33 branches and about 340 employees in Greater Cincinnati and ranks sixth in deposit market share.
The projections came as bank executives, including acting chief executive Verne Istock, met investors to shore up support for their plans. Bank One's former chairman and CEO, John B. McCoy, resigned in December after the company warned twice last year of trouble.
Bank One lost customers in 1999 as it shortened the time people had to pay their credit card bills and then imposed late fees and raised interest rates for those who missed the deadline.
The bank expects this year's profit from operations to be $2.80 to $3.00 a share, down from about $3.45 in 1999. That's below the forecast of $3.42 in a survey of 26 analysts by First Call Corp.
Bank One also said profit from operations for the fourth quarter of 1999 would be about $900 million, or 78 cents a share, a penny short of the average analyst estimate.
“We stumbled badly in our credit card business. We know what happened and are working hard to fix it,” Mr. Istock said.
The biggest problem was losing credit card customers. While the attrition rate was 9 percent in 1998, it jumped to 16 percent in 1999, with 75 percent of those driven away when the bank boosted a card's annual interest rate to more than 19 percent.
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