In a bid to further consolidate its year-long business ties, Total System Services, Inc. (TSS - Free Report) has entered into an agreement with Bank of America Corporation (BAC - Free Report) to provide its consumers processing services related to its credit card portfolio in the U.S. While most of the provisions remain undisclosed, it has been announced that the tenure of the services will be at least six years.
The company also declared that it expects to conclude the conversion of Bank of America’s consumer card portfolio from its in-house processing system by June 2014. The agreement allows Bank of America to use the TS2 software, the payment for which will be met over the long term.
Per the agreement, Bank of America will have access to Total System’s core payments engine, TS2, together with the right to use various customized processing solutions. The utilization of these services under the guidance of skilled personnel will ensure the smooth addressal of issues related to risk and financial management and will be beneficial to Bank of America.
The new agreement is in furtherance of a previous accord between the companies, under which, Total System processed small and other commercial business cards of Bank of America on its TS2 platform. In 2010, Bank of America extended its long-term contract for merchant and other card processing services through a new joint venture.
Overall, Total System’s contract portfolio received a boost in 2012 when it attained processing contracts from renowned banks like Royal Bank of Scotland, a unit of The Royal Bank of Scotland Group plc (RBS - Free Report) , BancorpSouth, a unit of BancorpSouth, Inc. (BXS - Free Report) and other banks of such stature.
Total System is scheduled to release its second quarter results after the closing bell on July 24. The Zacks Consensus Estimate for earnings for the quarter is currently pegged at 32 cents per share, representing an estimated year-over-year increase of 13.1%.
The company currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We maintain a long-term Neutral recommendation on the stock.