Last year, when he was First Union Corp.'s chief credit officer, David Nole was struck by its distribution of credit card delinquencies.

They were concentrated outside First Union's primary banking territories.

Other senior managers came to notice, too, as profits from the national card business began to sag. The company acted this year to be rid of that problem.

In two batches, First Union sold $2.2 billion of receivables-about 34% of its portfolio-to Providian Financial Corp. of San Francisco. All the accounts were from outside the 12 eastern states where First Union has its 2,700 branches.

Those accounts "had an inordinate amount of risk and lower profit potential," said Mr. Nole, who was named president of First Union Direct Bank-the credit card subsidiary-in April after the portfolio sales.

That was a major reversal of course for First Union, which just a few years earlier had made a concerted effort to become a national card issuer. In retreat, it had company. Wells Fargo & Co. and PNC Bank Corp., for example, have similarly decided to focus their card activities on core markets and to let others deal with the growing complexities and shrinking profit margins elsewhere.

"A number of banks have tried to do national strategies, and a number of them have failed," said Catherine L. Murray, senior bank analyst at J.P. Morgan Securities, New York. The few remaining nationwide issuers are proving "you have to have very strong marketing and credit systems, and very efficient technology," to play in that league.

Ms. Murray said First Union lacked "enough critical mass in some of these areas to maintain the profitability of the product."

Under Mr. Nole, First Union's cards unit is pursuing "accounts where you can have a deeper relationship with the customer."

The Charlotte, N.C., banking company sees the card as a cross-selling and relationship tool, Mr. Nole said. For example, if a First Union depositor has a low-interest-rate card from another bank, First Union will match the rate. It may have to take a loss on the card account in the interest of a longer-term, more profitable relationship.

Or if a loyal First Union customer has a faulty credit rating, the bank may issue a credit card anyway-though with a higher interest rate.

The goal, Mr. Nole said, is to get a First Union credit card to every bank customer and for all credit card customers to become bank customers.

"The value proposition we put in front of the customers is total financial management," Mr. Nole said. "We run the gamut on who the customer is and our ability to meet their needs."

First Union hopes to win customers by "solving all of their financial problems," from mortgages to mutual funds, Mr. Nole said. "We see the credit card as an extension of that."

Today, First Union has 4 million cards outstanding and $5.5 billion of receivables.

Mr. Nole said growth potential is vast. With its takeover this year of CoreStates Financial Corp., First Union increased its customer base to more than 15 million. Only about one-fourth of them hold its credit card.

In the early 1990s, First Union's card goals were much larger. Fred M. Winkler, formerly of Citibank and AT&T Universal Card Services, was hired in 1993 to build First Union into one of the card industry's elite.

Mr. Winkler left when the national strategy was abandoned.

What he did paid off, in that it gave First Union the tools to embark on its current, more confined expansion, said Mr. Nole, who reports to Jack M. Antonini, executive vice president for consumer banking. Mr. Antonini came to First Union in August 1997 from the monoline card issuer First USA Inc. and before that had headed USAA Federal Savings Bank.

First Union developed a "world-class" data base management system, customer service organization, and credit risk management tools, Mr. Nole said.

"If we hadn't gone national, we wouldn't be able to understand the range of products and value propositions we can give to customers," he said.

The target customer "understands who First Union is and has some brand recognition-and that fits very neatly with our banking states," he said. "If we can embed ourselves in a relationship with a customer, that will allow us to have a more profitable business going forward."

Before joining First Union in January 1996, Mr. Nole had spent seven years at Advanta Corp., where he rose to head risk management and credit policy. Before that, he worked at Citicorp, where his last job was head of consumer lending in Florida.

His task at First Union involves working with other parts of the company to make sure credit cards serve the organizational cross-selling effort. Credit card solicitations beckon new customers and invite existing ones to try other services.

At the same time, customer data bases from other units of the bank yield prospect lists for the cards group.

"We are not looking for customers who view us like the monolines, as a one-trick pony," Mr. Nole said.

Mr. Nole said he is not interested in "card-surfers" or people seeking "cheap credit." The company will maintain its several affinity cards, which-conveniently enough-are marketed with regional organizations, not national ones. Among these are an Atlanta Braves Visa card and Charlotte Hornets MasterCard.

"First Union had to determine on which playing field they could best compete," said James L. Accomando, president of Accomando Consulting Inc. in Fairfield, Conn.

"People by nature like to have one relationship if they can," Mr. Accomando said. "If you can meet most of their needs, then they're extremely loyal."

First Union has no plan to grab market share by acquiring smaller banks in its region. Chairman Edward Crutchfield has disavowed that type of growth.

But if, as Mr. Crutchfield has suggested, there might be mergers of equals that expand geographical coverage, "there may come a time when it is appropriate for First Union to have a more national card lending business again," said Morgan Stanley Dean Witter analyst David B. Hilder.

"Banks are making business-mix decisions that make sense today and for the next year or two," said Ms. Murray of the J.P. Morgan securities unit. "If the business mix changes or the scope of the geography changes, it is likely that firms will reevaluate.

"Nothing is very stagnant here," she said.


Processing CompanyStarts Canadian Unit

BROWN DEER, Wis.-U.S. Processing Inc., part of Transaction Systems Architects Inc.'s family of payment processing and software companies, said it is operating in Canada for the first time.

A subsidiary formed this year, USPI Canada Inc., helped deploy an automated teller machine in Canada's Interac debit network for the Access Cash system of Minneapolis.

USPI Canada has an agreement with Bank of Montreal for transaction routing and settlement.

Access Cash International, which puts ATMs at nonbank sites, said it expects to have 500 in Canada by yearend.

U.S. Processing said it drives more than 4,000 ATMs for its clients and is adding machines at the rate of 100 a week. In a typical expansion, it recently gained almost 100 machines at E-Z Serve stores in New Orleans with the signing of AmericaOne of Eustis, Fla. Another new client is Canyon National Bank of Palm Springs, Calif., which is putting ATMs in gambling casinos.

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