Credit card specialists posted varied results in the third quarter, amid further signs that the rise in loan losses is starting to slow.
MBNA Corp. recorded a 33% jump in net income over the third quarter of 1996, to $171.8 million. Capital One Financial Corp. reported a 27% increase, to $49.3 million.
Advanta Corp.'s net income declined 4.5% from the same quarter in 1996 to $42.4 million-yet, like the other two, beat analysts' expectations.
Loan losses were up from a year earlier, but a comparison of the growth rate in losses to loan growth three quarters ago indicates a slowdown in chargeoffs.
Industrywide, "receivables growth is moderating, but dollar losses are slowing even faster," said Mark Alpert, an analyst at BT Alex. Brown Inc.
MBNA's net chargeoffs-the lowest in the industry-increased to 4.07% of receivables, from 3.38% a year ago. Capital One's loan losses jumped to 6.66%, from 4.19%, and Advanta's rose to 5.38%, from 3.21%.
James Shanahan, a consultant at Business Dymamics, Nyack, N.Y., saidcard companies are learning to live with higher losses.
"Smart issuers can manage it so that the bottom line can increase," he said. "It really changes the whole complexion of this industry and makes it a much more stable business. It's not about credit losses. It's about bottom line."
For MBNA, which commands unusual customer loyalty by offering cards linked to alumni associations, colleges, sports teams, and other special interests, the quarter was business as usual.
Brian D. Dalphon, director of investor relations at MBNA, said "focusing on the fundamentals" and "getting and keeping the right customers" through 4,500 affinity programs were the keys to success for the nation's second- largest card issuer.
"We are very effective at attracting new balances and increasing balances on existing customer accounts," he said.
The Wilmington, Del., issuer is "a very focused, disciplined company," said David S. Berry, an analyst for Keefe, Bruyette & Woods Inc.
Capital One, based in Falls Church, Va., attributed its strong result to higher-yielding products, the repricing of introductory rates and a windfall revenue from a change in securitization accounting. Capital One boasts the highest net interest margin, at 9.05%.
Advanta's third-quarter results were not as bad as analysts had predicted after a first-quarter loss of $19.8 million and second-quarter earnings of only $5.4 million.
Indeed, despite the decrease in net income from a year ago, the third quarter marked a strong comeback for the Spring House, Pa., firm., with earnings per share of 92 cents-beating the First Call consensus by 20 cents.
"All our employees' efforts and hard work have been focused on meeting our strategic goals of improved performance and increasing shareholder value," said Alex W. Hart, chief executive officer.
Industry observers, who note that Advanta has said it was considering a sale, said the results will make the company more attractive.
Mr. Shanahan of Business Dynamics said, "It should make the guys at the table fell pretty good about the situation, especially in this critical phase of being sold."
