With large, national banks repor-ting stronger-than-expected second-quarter profits, NCR Corp. expects later this year to receive a long-awaited gift: a rejuvenated bank-ATM market.
During an analysts' conference call last week, Bill Nuti, the ATM maker's chairman and CEO, said banks' improved financial performance might create an increase in orders of intelligent-deposit ATMs that eliminate the need for envelopes to deposit cash or checks.
Midsize banks that have watched the market for envelope-free ATMs develop from the sidelines may finally jump in and begin making their own orders, Nuti said.
"We continue to see the large U.S. banks move aggressively on deposit automation," he said.
Because of the nation's financial crisis, orders have remained steady without any meaningful pick up, he says. But Nuti believes the stars are aligning to make things better. "I think you will see in the back half of this year that [envelope-free ATM] deposit activity will pick up," Nuti said.
By installing envelope-free ATMs, large banks have developed a creative advantage over midsize banks, Nuti contends. That might change, however, he believes.
"We are hoping that in 2010 those midsize banks that put off deposit-automation projects because of the economic crisis will once again review them and move forward more aggressively," he said.
Tight budgets have kept most banks from buying envelope-free ATMs, which can cost as much as $35,000 each. But their tightfistedness is expected to loosen up next year, according to a study by published by Aite Group LLC, a Boston-based consulting firm (ADN, 6/25).
"I talked to a lot of bank executives, and they put off buying intelligent-deposit ATMs because they don't have a lot of money to spend," says Kate Monahan, an Aite analyst who conducted the survey.
Aite Group polled 23 of the 80 largest U.S. banks based on ATM-network size. Only 12% of the respondents' combined 42,780 ATMs supported envelope-free deposits at the end of 2008, Monahan says.
The Aite report, however, provided some good news for NCR and other ATM makers, including Wincor Nixdorf AG and Diebold Inc., that produce envelope-free machines. It determined that installations of the machines could grow to 26% of ATM deployments as bank executives have more freedom to spend next year.
Many banks also will have to replace their aging machines, Monahan says.
She estimates the survey respondents combined will deploy some 44,390 ATMs in 2010.
Despite the financial turmoil that has roiled the nation's economy for nearly two years, Bank of America Corp., Wells Fargo & Co., and JPMorgan Chase & Co.
continue to purchase intelligent-deposit ATMs from the three-largest manufacturers.
Chase, which operates the nation's second-largest bank-ATM network with 14,272 machines in 23 states, plans to convert its entire ATM network to envelope-free machines.
"So we are already committed," Tom Kelly, a Chase spokesperson, tells ATM&Debit News. Chase purchased Washington Mutual Inc. in September. Washington Mutual operated an ATM network of 4,962 machines, but none of its ATMs were envelope-free.
Wells Fargo, which purchased Wachovia Corp., is beginning to convert some Wachovia ATMs to intelligent- deposit models, Richele J. Messick, a Wells Fargo spokesperson, wrote in an e-mail message to ATM&Debit News.
Wells Fargo will deploy envelope-free ATMs in 15 former Wachovia branches in Colorado beginning in November. Messick did not disclose the number of ATMs Wells Fargo will convert.
As a independent bank, Charlotte, N.C.-based Wachovia did not deploy envelope-free ATMs, Messick adds. Wells Fargo, which operates the nation's third-largest ATM network with 12,227 machines in 39 states, purchased Wachovia last year.
Nuti is optimistic that national banks, including Chase, Bank of America and Wells Fargo, will increase orders for shipments of intelligent-deposit ATMs because they recently reported strong second-quarter revenues and profits.
NCR this month also reported its second-quarter earnings. Though the company remains profitable, its earnings fell below analysts' expectations because of the slumping worldwide economy. NCR reported a 44.2% drop in net income for the second-quarter ended June 30, to $24 million from $43 million during the same period last year. The manufacturer also reported a 15.8% drop in revenue, to $1.12 billion from $1.33 billion.
"Year-over-year revenue was impacted by the overall downturn in the global economy and its impact on capital spending, particularly in the financial-services and retail-hospitality industries," Nuti said in prepared statement. ATM