This is so sweet on a cloudy day.... Mentions the Exchange...
biz.yahoo.com
Wednesday August 4, 8:50 pm Eastern Time
FOCUS-First Union's Online plan gets lukewarm review
(Recasts with details from conference call, analysts comments, stock price)
NEW YORK, Aug 4 (Reuters) - First Union Corp.'s (NYSE:FTU - news) beleaguered stock slid about four percent Wednesday after the North Carolina bank failed to deliver in a much-awaited presentation to Wall Street the benefits of its technology push.
The No. 5 U.S. bank, which is making a concerted push into technology as a way of enhancing their traditional banking product line-up, plans to launch a new website next week, offering on-line trading, credit application, financial planning and budgeting capabilities, it said at its meeting with analysts in New York.
Further, it said that it was aiming for 15 percent annual revenue growth at its capital markets and management businesses.
On the New York Stock Exchange, First Union stock fell $1.69 to $44.56. It has tumbled about 30 percent since early this year as it struggles to digest a string of acquisitions.
When First Union earlier this year warned of weaker profits due to slack cost savings from its acquisitions and higher expenses, it made a major shift in strategy to build revenues through online banking and its capital markets and management businesses, which were the themes of Wednesday's three-hour presentation.
''I was really hoping that there would be something that would breathe some life into what we already know,'' said Stewart Johnson of CIBC World Markets. ''There was a lot of fluff about the Internet. There was nothing substantial that came out of three hours of talking.''
Its Internet focus -- one of many in the U.S. financial services industry -- comes as First Union (NYSE:FTU - news) revamps its retail branches, upgrading and better utilizing computers, centralizing customer service operations, cutting back on square footage and creating a sales cultures among staff.
First Union said it was in serious talks about online alliances.
''We are in some pretty serious discussions with some alliance partners,'' the bank's chairman, Edward Crutchfield, said in answer to an analyst question on the Internet. The bank also studied forming a stand-alone Internet bank, though customers still wanted to reach a person if needed, executives said.
Other U.S. banks and brokers are rushing to offer checking and savings accounts, mortgages, stock trading and car loans online to meet the rush of demand from investors doing more and more of their financial businesses over the Internet.
Tapping technology changes reshaping the banking industry, it recently teamed up with Chase Manhattan Corp. (NYSE:CMB - news) and Wells Fargo and Co. (NYSE:WFC - news) to form a new company to allow people and businesses to receive and pay bills electronically.
As First Union joins other banks focusing on the Internet, it nearly ruled out the possibility of a major acquisition after struggling to integrate its $16 billion Philadelphia- based CoreStates Financial acquisition.
''In all candor, I don't think an acquisition is the right thing for us right now,'' Crutchfield told analysts, although he added the bank might be interested in buying a small money management firm or regional brokerage.
On its troublesome CoreStates acquisition, the company said the rate of CoreStates customers leaving the franchise following the acquisition has decreased. It said that customer service complaints, which sky-rocketed after the acquisition, had actually started receding and are in fact 37 percent lower this year from the peak last March.
''On the whole, we believe the tone was upbeat and we therefore continue to expect more positive results from the CoreStates franchise,'' said James Schutz, an analyst at Stephens Inc. in a research note regarding the integration of CoreStates.
First Union said the goal for its capital markets arm, including investment and merchant banking and derivatives, was $3.165 billion in revenues this year, $3.58 billion in 2000, $4.13 billion in 2001 and $4.75 billion in 2002.
In information made available on its Internet site, the bank also said its goal was for its capital management arm, which includes brokerage, trust and private client businesses, to produce $2.45 billion in revenues in 1999, $2.875 billion next year, $3.31 billion in 2001 and $3.8 billion in 2002.
To the disappointment of some analysts, the company disclosed few other numbers, noted Johnson.
The bank's capital markets strategy appeared ''sell-thought'' in terms of service and cross-selling to the customer, he added. But their strategy on the retail and small business side failed to impress, he said.
On July 14, the second-quarter operating earnings fell, as expected, to $801 million, or 82 cents a diluted share, before a one-time gain. The bank warned at the end of May that profits would be weak after recent acquisitions.
Last week, its board named Ken Thompson, now head of capital markets, as the bank's president, replacing John Georgius, who will retire at the end of the year after 24 years at the bank.
Analysts said Georgius was held responsible, rightly or wrongly, for the difficult integration of recent acquisitions, including that of CoreStates and the rocky launch of its so-called Future Bank Initiative to convert its retail branches into technology, sales-focused centers.
But Georgius told analysts at Wednesday's meeting his work at First Union was done, although he would remain active in business.
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