PNC Bank Corp.'s 10-year contract with the American Automobile Association has proven a setback for the bank's credit card outsourcing partner, Card Issuer Program Management Corp.

Their 14-month relationship will end sometime next quarter, said Jerry D. Craft, president and chief executive of Card Issuer Program Management in Atlanta.

Mr. Craft formed his company in 1994 to help create for other banks the kind of success Wachovia Corp. had when Mr. Craft built it into a top-20 card issuer. PNC was his biggest client.

Both companies said the AAA contract, announced in January, propelled Pittsburgh-based PNC into credit card big leagues and obviated the outsourcing relationship.

The affinity contract, giving PNC the exclusive right to market a range of financial services to 34 million auto club members, "in many respects has created new circumstances," said PNC spokesman Jonathan Williams.

The breadth of the relationship with AAA requires many of PNC's lines of business to act in a coordinated fashion.

"The card program is much more integrated with other activities in our bank, creating the need to have a PNC employee run the business," said Mr. Williams.

"We worked with (PNC) on landing that contract," said Mr. Craft. "In some ways we worked ourselves out of a job."

Mr. Craft said that during their partnership, PNC more than quadrupled its card receivables, to $3.5 billion. The contract between the companies, he said, allowed for the flexibility to terminate the relationship.

Mr. Craft teamed up with PNC to provide marketing and back office support. The partnership was hailed as the beginning of a new kind of outsourcing, where card issuers turned to companies that specialize in marketing and other specialized aspects of managing credit card businesses.

Soon after Card Issuer Program Management's debut, Capital One Financial Corp. announced plans to provide similar services to credit card issuers.

PNC and Bank of Boston Corp., which reentered the card business a little more than a year ago, were the largest banks to have substantial relationships with such outsourcers. Bank of Boston did not disclose details about its arrangement, however.

In May 1995, A. William Schenck 3d, then executive vice president of PNC, praised Mr. Craft as a "world-class executive" and said "we see no reason why this relationship should ever end."

Changes in PNC's senior management may have contributed to the split between Card Issuer and PNC. Mr. Schenck, who played a role in securing the relationship with Mr. Craft, left PNC for Great Western Bank about a year ago.

Keith D. Coughey, the top credit card executive at PNC who was in charge of risk and data base management of all consumer credit, left the Pittsburgh-based company in May to join General Motors Acceptance Corp.

Also in May, James E. Gorman came on board as president of PNC National Bank, the credit card operation in Wilmington, Del. He was most recently executive vice president of Household Credit Services in Salinas, Calif.

Most of the 30-some PNC employees who had been hired by Card Issuer last year to run the card program were hired back by PNC, said Mr. Williams.

Card Issuer is currently working with Webster Bank of Waterbury, Conn., and First American Corp. of Nashville, and is negotiating with institutions both larger and smaller than PNC.

"We are prepared to deal with change," said Mr. Craft.

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