Wednesday , July 17, 2019

In the Shadow of the Fiserv-First Data Deal, FIS Ponders ‘Actionable’ Acquisitions That ‘Make Sense’

Fidelity National Information Services Inc. expects further processor mergers in the near term and isn’t averse to initiating them in cases where they fit the company’s strategy, its chairman and chief executive said Tuesday morning.

“We will always look for opportunities,” said Gary Norcross, who is also president of the Jacksonville, Fla.-based processor and financial-technology provider. “We feel great about our position, our ability to compete,” he added, in reaction to the Jan. 16 announcement of rival Fiserv Inc.’s proposed acquisition of First Data Corp.

“That said, we would be interested [in potential deals].”

Mergers among financial institutions are also on FIS’s radar screen, he said, particularly after last week’s news of the proposed merger of two big regional banks, SunTrust Banks Inc. and BB&T Corp. If consummated, the combination will create a bank with $441 billion in assets, good for eighth place among U.S. institutions.

FIS, which competes with both Fiserv and Jack Henry & Associates Inc. in payments and core-processing technology and with First Data in payments processing and PIN-debit networking, is looking for specific characteristics in any potential deal, Norcross told equity analysts during a presentation of FIS’s fourth-quarter 2018 and full-year results.

“We want to find something that accelerates our growth rate,” he said. “We think about wholesale banking and payments. There are a number of opportunities, but they have to be actionable and make financial sense.”

On the subject of the SunTrust/BB&T deal, “it’s early to say what our response is,” Norcross said. In general, he added, “a lot of those institutions are looking for how to modernize platforms and lower their cost of ownership. While people are looking to merge and drive scale, all are looking at the need to change.”

Combinations could help meet that need by providing new resources for investment, particularly in areas like cloud technology, Norcross added. “Financial institutions are beginning to realize they have to invest in new technology. [Information-technology] spend is opening up in the market,” he said.

While this trend could benefit vendors such as FIS, Norcross argued the latest deal will not likely touch off a frenzy of banking mergers. “We don’t think consolidation will accelerate over 2019, but it’s very hard to predict,” he told the analysts.

For the quarter, FIS posted $2.17 billion in adjusted revenue, a growth rate of 3.2% year-over-year when factoring out currency fluctuations and acquisitions. Adjusted revenue for the year totaled $8.43 billion, up 2.8% over 2017. Adjusted revenue for the Integrated Financial Solutions unit, which includes payments, came to $1.13 billion, up 2.5%. For the year, this revenue totaled $4.4 billion, a 3.9% increase.

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