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Netzee -- Helping Community Bankers Defend Their Turf

Netzee -- Helping Community Bankers Defend Their Turf Are you worried that your local community bank is going to be gobbled up by some national monster now that the landmark financial services legislation has been passed? Or, are you more worried that your local bank won't cut it in the next century because it isn't on the web?

If it's the web you're worried about, don't. Netzee, Inc. (NETZ) specializes in Internet banking products and services and e-commerce solutions to small and mid-sized banks, thrifts and credit unions, typically with total assets of less than $10 billion. And if you're institution doesn't have a web site, no problem: NETZ does that, too.

The company, which went public only last November 9, has contracts with over 600 financial institutions. So far, its sales effort has been concentrated in Texas and Georgia, but is moving to more populous states like California and Pennsylvania. The market is huge: According to International Data Corporation, the 8 million internet banking users at the end of 1998 will swell to 40 billion by 2003. Moreover, while 50% of large financial institutions already have a web presence, less than 5% of community financial institutions are web enabled.

Of course, there is nowhere to go but up: For the six months to June, 1999, NETZ's revenues were all of $2 million on which it lost $21 million. But with the offering, the company has $20 million in the bank and virtually no debt -- enough, at least, to last another six months.

If NETZ can execute on its business plan there is clearly enormous potential. But the bigger question is whether NETZ's customers can execute on theirs. After all, do we really need community banks, anyway? If I can pay my bills through Intuit, or my favorite stock broker, or maybe Amazon or anyone else, who needs these services? Maybe that's why the stock hasn't budged from its offering price of $14.00.

Sure,Netzee's market is going to grow as community banks defend their turf, but ultimately their market is slated for consolidation, too. Can you bank of this stock? I wouldn't.