J.P. Morgan buys credit card portfolio from Providian
NEW YORK, Jan. 16 (UPI) -- J.P. Morgan Chase & Co. Inc. said it has reached an agreement to acquire an $8.2 billion credit card portfolio from struggling credit card issuer Providian Financial Corp.
J.P. Morgan, the nation's second largest bank holding company, said it will pay a mid-single digit premium for the Providian master trust, which contains about 3.3 million in active card accounts.
The bank said the loans are of higher quality, although Providian mostly has focused on lending to people with tarnished credit histories.
Still, the Providian loans are of lower quality than the average J.P. Morgan credit card loan, bank Chief Financial Officer Dina Dublon, said.
San Francisco-based Providian's customers, who tend to have poor track records repaying loans, have been hurt harder than most by the U.S. recession.
This has led to rising loan losses and slack demand at Providian, which is cutting jobs and is looking to sell parts of its large credit card portfolio to boost results.
"The sale of the Providian Master Trust enhances our capital, strengthens our liquidity position, and tightens our strategic focus on our middle market customers," Providian Chief Executive Joseph Saunders said.
Providian also said it was making progress on selling its international operations and still was working on selling a $3 billion card portfolio which has higher loss rates.
The latest deal, which is scheduled to be completed in the first quarter, is expected to add to J.P. Morgan's earnings this year and will bring its credit card portfolio to more than 27 million accounts.
"Today's announcement is consistent with our strategy to increase our customer base and build earnings by direct customer acquisitions, deepening existing customer relationships and through economically sound acquisitions," said Richard Srednicki, the head of J.P. Morgan's credit card business.
Srednicki said, "We are comfortable with the performance of the portfolio and believe it will complement the breadth of our existing portfolio and improve our business profitability."
Meanwhile, TradeWeb LLC, an online fixed-income markets, said that J.P. Morgan, the investment banking arm of J.P. Morgan Chase & Co., has made a significant equity investment in the company, and will obtain a seat on its board of managers.
J.P. Morgan, already an active market maker for several of TradeWeb's online marketplaces, joins an elite group of global bond dealers that are equity investors in TradeWeb.
The other investors are Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley and Salomon Smith Barney.
J.P. Morgan's investment in TradeWeb comes at a time when demand is surging for the company's online fixed-income markets, which link major dealers to their institutional clients on an integrated global electronic trading network.
TradeWeb recently eclipsed $8 trillion in total trading volume since trading began in 1998, with half of that volume occurring just within the past seven months.
J.P. Morgan will now serve as a market maker for all of TradeWeb's online fixed-income markets including TBA mortgages and US Commercial Paper.
Mark Werner, managing director and head of Global Rate Securities at J.P. Morgan, said, "This financial investment has dual significance for J.P. Morgan. First, it gives us an equity stake in a rapidly growing financial services business. More importantly, the investment cements our relationship with a company that provides a service that is becoming indispensable to our clients. This is a win-win partnership."
AMR posts $798 million loss
FORT WORTH, Texas, Jan. 16 (UPI) -- AMR Corp., parent of American Airlines, said it posted a fourth quarter record net loss of $798 million, as revenues at the world's largest air carrier dropped 22 percent on a weak economy and fear of flying after the Sept. 11 attacks.
AMR, which acquired TWA last year, said the loss, including all special items, amounted to $5.17 a share, compared with a net income of $47 million, or 29 cents a share during the same period a year earlier.
The company also said it was speeding up the retirement of its fleet of Boeing 717 100-seater aircraft to this June under an agreement with Boeing Co.
AMR said last week it was considering the move as part of a longer-term program to save training and maintenance costs by flying a limited number of plane types.
Excluding the one-time items, mainly charges for idling planes and employees but also government emergency aid of $29 million, AMR said the loss was $734 million, or $4.75 a share, compared with earnings of $56 million, or 34 cents, before special items a year earlier.
Analysts on Wall Street had expected AMR to post a loss of $5.08 a share, according to Thomson Financial/First Call.
Don Carty, AMR's chairman and chief executive, said the last three months of 2000 were difficult because of the lingering effects of the Sept. 11 attacks.
"Traffic, particularly business travel, was down significantly in the quarter, which -- when combined with lower average fares -- resulted in a record quarterly loss," he said.
While disappointed with the results, the company has taken many positive steps to bolster its financial position.
"We strengthened our cash reserves, despite the huge losses," Carty said, "and further improved our position by cutting capacity, reducing capital spending, cutting operating costs, and further simplifying the fleet."
In addition, Carty noted that "the commitment of our people to making American an industry leader was evident in December, when American registered an industry-leading completion factor of 99.7 percent and posted outstanding on-time performance."
The previous record loss was $414 million in the third quarter last year, including $397 million in one-time losses from the Sept. 11 attacks and $508 million in government emergency aid for the airline industry.
Total operating revenues in the fourth quarter dropped more than $1 billion to $3.8 billion from $4.9 billion a year earlier, as AMR cut the number of flights because of reduced demand and lowered fares to win back passengers.
Available seat miles at American Airlines, a measure of overall capacity, were down more than 13 percent, while revenue yield per passenger mile, a measure of average fares, was down 15 percent.
Bank One posts profit
CHICAGO, Jan. 16 (UPI) -- Bank One Corp. said it posted a fourth quarter net profit of $541 million, or 46 cents a share, compared with a net loss of $512 million, or 44 cents a share during the same period a year earlier.
Last year's loss was due to loan losses, charges, and increased reserves for non-performing debt. The company has shed under performing businesses and cut costs, which combined with strong credit card operations to result in a fourth-quarter 2001 profit.
Excluding a $224 million after-tax restructuring charge, the company said it posted a net income of $765 million, or 65 cents a share in the 2001 fourth quarter.
Analysts on Wall Street expected the lender to post a net income of 65 cents a share, according to Thomson Financial/First Call.
"We are confident earnings will continue to improve, unless there is further material economic deterioration," said Chief Executive James "Jamie" Dimon.
The bank said its provision for bad loans improved to $765 million from $1.51 billion as it cleaned up its credit portfolio.
Bank One's First USA credit card unit reported quarterly operating income of $326 million, up $192 million from a year ago. The results were also bolstered by its acquisition of Wachovia Corp.'s credit card business in July.
Bank One's net interest income, derived from lending, rose to $1.24 billion. But non-performing assets, or loans with repayment problems and real estate acquired through foreclosures, rose 19 percent from Sept. 30, as the recession made it more likely that people and companies would default on loans.
Non-interest income rose 19 percent to $363 million as the company shed its loss-making auto lease business and increased deposit service fees. Non-interest expense fell 15 percent from a year ago, due to job cuts and other reduced costs.
Abbott Labs posts lower results
ABBOTT PARK, Ill., Jan. 16 (UPI) -- Pharmaceutical and health-care products maker Abbott Laboratories Inc. said its fourth quarter net income after charges fell to $614 million, or 39 cents a share, from $753.4 million, 48 cents a share during the same period a year earlier.
The company said one-time charges in the fourth quarter totaled 13 cents a share, including a 9 cents per share non-cash charge for acquired in-process research and development related to the acquisition of Vysis Inc.
Net earnings, excluding one-time charges, Abbott reported a profit of $816.5 million, or 52 cents a share.
Analysts on Wall Street had expected the company to post a net income of 53 cents a share, according to Thomson Financial/First Call.
Worldwide sales for the fourth quarter rose 20 percent to $4.45 billion from $3.71 billion in the fourth quarter of 2000.
Total sales were unfavorably impacted 0.9 percent due to the effect of the relatively stronger U.S. dollar. Without the impact of exchange, total sales increased by 20.9 percent.
Total fourth quarter sales in the United States rose 14.3 percent to $2.71 billion from $2.37 billion in the fourth quarter of 2000.
Total international sales, including direct exports from the United States, jumped 30.1 percent to $1.74 billion from $1.34 billion recorded a year ago.
International sales were unfavorably impacted 2.6 percent due to the effect of the relatively stronger U.S. dollar. Without the impact of exchange, international sales increased by 32.7 percent.
The company also reaffirmed its earnings forecasts for 2002.
"In delivering a year of excellent results, we made important strides in every major dimension of our company," said Miles D. White, chairman and chief executive officer.
"We acquired and integrated Knoll and positioned our pharmaceutical business for continued double-digit growth. We significantly strengthened our science and technology platforms, our new-product pipeline and our quality systems. As a result, we are poised for strong growth in the coming years," he added.
Earnings fall at Levi Strauss, may close some factories
SAN FRANCISCO, Jan. 16 (UPI) -- Jeans maker Levi Strauss & Co. reported a 16 percent decline in its quarterly earnings amid weak retail conditions in the United States and Japan and said it is in talks with unions about closing U.S. and European factories.
The privately held company, one of the world's largest apparel makers, said net income for the quarter ended Nov. 25 fell to $62.9 million from $75.4 million a year ago.
Earnings before net restructuring charges rose 12 percent, however, to $60 million from $54 million in the year-earlier period.
The company said it incurred a restructuring charge of $22 million related to layoffs in its U.S. and Asia-Pacific businesses.
The clothing maker has been hit especially hard in Japan where a number of the company's top retailers have gone bust in the midst of an economic downturn.
Philip Marineau, Levi's chief executive, said the planned plant closures were part of an effort to change Levi into "a marketing and product-driven" company from a manufacturing entity.
The company operates seven plants in Europe and is planning to close two high cost facilities in Scotland, while the number of factory closings in the United States has not yet been determined, the company said.
Levi, which has eight factories in the United States, has a worldwide workforce of approximately 16,750.
Fourth quarter sales fell to $1.24 billion from $1.29 billion a year earlier.
Sales in Asia fell 2.7 percent to $103.1 million in the quarter just ended, while the Americas region led the weakness with a sales decline of 8 percent to $821.9 million. The only bright spot was in Europe, where sales rose 7.9 percent to $309.8 million.