Wachovia Corp.’s decision to seek a buyer for all or some of its $8 billion of credit card loans may represent the biggest opportunity to date for American Express Co. to buy its first major U.S. bank card portfolio.

There are reasons to think such a deal could happen. American Express says it is in talks with three companies about buying their card loans. In 1998 Wachovia had extensive talks with Amex about issuing its credit cards — and even considered dropping out of Visa U.S.A. in order to do so.

Beverly B. Wells, the Wachovia executive vice president who testified about the talks with Amex at last summer’s antitrust trial against Visa and MasterCard International, said in an interview Friday that information about the portfolio, which has 2.8 million accounts, has been sent to potential acquirers, and a preliminary bidding round will take place over the next two to three weeks.

“At this point the field is pretty large,” with many companies expressing interest, she said.

Ms. Wells said Wachovia was not sure whether it wanted to sell all its accounts, or just the 70% that belong to customers who lived outside the geography of the bank’s branch network. Either way, the company will likely seek a “partner” that would issue cards to Wachovia customers under an agent bank relationship — which is just what Bank of Hawaii is set to do with American Express.

“I’m very aware of Bank of Hawaii’s decision to create an agreement with American Express,” said Ms. Wells, who heads Wachovia’s retail business and previously ran Wachovia Bank Card Services.

Despite its preference to deal with one buyer, Wachovia could be pushed into splitting up the portfolio if it goes on sale, she said. “The issues around the agent bank might compel us to look at multiple relationships.”

Jerry D. Craft, who was president of Wachovia Bank Card Services until 1994, when Ms. Wells succeeded him, said Wachovia needed a buyer “with some deep pockets” for its portfolio, which he described as “pristine” in terms of credit quality.

While Wachovia is predominantly a Visa issuer, many of the companies being named as likely buyers are not. Citigroup Inc. and MBNA Corp. are predominantly MasterCard issuers. The Visa issuers that industry experts say are large enough to swallow an acquisition of this size include Capital One Financial Corp., Bank of America Corp., and the First USA division of Bank One Corp.

Visa would not comment on the possibility of Wachovia leaving its fold.

Over the past three to five years, several prominent midsize card issuers — including First Union Corp. and KeyCorp. — have decided to sell their portfolios and enter agent bank relationships. The argument has been that profitability in the card business requires econ-omies of scale that can only be achieved by amassing outsized loan portfolios.

For some time Wachovia has seemed to serve as an example to the industry that a midsize card issuer could be successful. Its decision to quit the business fuels the argument that a midsize portfolio cannot be profitable enough, and contributes to the polarization of credit card issuers between the enormously large and the rather small.

“Unless you’re a scale player, which means the size of Citigroup or MBNA or Capital One, it doesn’t make sense to build a business — it makes sense to sell it,” said Richard Bove, an analyst at Raymond James & Associates, who upgraded Wachovia’s rating to a long-term “buy” following the announcement last week of the possible sale.

“Not only is this portfolio a pretty clean one, but it’s going to go at the higher end of the 17% to 25% premium,” Mr. Bove said. While MBNA and others will probably bid on it, “Citigroup is likely to walk away with this thing without any trouble,” he said.

Mr. Craft, who now runs a card portfolio management firm called Inficorp, said Wachovia’s motivation to sell does not have to do with bad loans, but with unprofitable accounts from outside the bank’s geography that have diluted returns. The credit card customers who are also bank depositors — and are in the portfolio’s minority — are more profitable, he said.

Ms. Wells gave her assessment of the industry: “When you see the level of marketing spin that the very large players are applying to this business, you know the reason they would do that is to eliminate competitors. They’re willing to overspend in order to capture market share, even though they’ve already got market share. And what it’s done is just made it very expensive for the smaller player.”

The 1,400 people who work in Wachovia’s cards business would be offered other positions at the company in the event of a sale, she said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.