PHOENIX - On the surface, an announcement by Bank of America Arizona on Oct. 27 seemed of only local interest, and a bit gimmicky.

It actually spoke volumes about the awakening of a credit card issuer that many competitors had been writing off as a sleeping giant.

The BankAmerica Corp. subsidiary said it would begin printing customers' photographs and signatures on the fronts of credit cards. The news had competitive implications, since Bank One Arizona had introduced picture cards about two months earlier.

Like Bank One, Citicorp, and a few others before it, Bank of America was selling security - the idea that a card with a picture and facsimile signature would be less susceptible to fraud.

There were also hints that if the Arizona program worked, Bank of America would extend its picture-taking to other states where it has retail operations.

Making a Splash

But these details were secondary to the fact that Bank of America was making a new-product splash - which industry observers found remarkable in itself. BankAmerica Corp.'s card business had seemed to be going nowhere, both by the conventional measure of receivables and by general impressions of a lack of aggressiveness amid some problems in credit quality.

And between the lines of the picture-card announcement emerged BankAmerica's strategic thinking. It has the credit card unit working with the consumer bank to enhance and cement relationships, starting with the cardholders who must venture into branches if they want to have their pictures placed on cards.

"Doing something like this with the retail bank is what we're all about," Robert D. Sznewajs, executive vice president and head of BankAmerica's card division, said when the picture card was announced.

"We view [the credit card] as integrated in the retail system. We and the retail bank have to work and deliver on these ideas together," Mr. Sznewajs said.

Something to Talk About

He said more product announcements will follow. They will "give us something else to talk to customers about as we try to lock up their core relationships and core businesses."

More and more retail and credit card bankers are talking this relationship game.

First Chicago Corp., known nationally as the issuer of First Card MasterCard and Visa, provides a different brand to depositors of First National Bank of Chicago. The card emphasizes the local tie by showing the skyline of Chicago.

Former BankAmerica card executive Catherine Marsh carried the gospel to the card group of HSBC Holdings' Marine Midland Banks Inc. in New York State, which she just joined as senior vice president. She called the relationship connection "the key to the future in credit cards." (See American Banker, Nov. 24, page 19.)

Potent Possibility

But if BankAmerica makes it work, building on its base of seven million Visa and MasterCard accounts and 1,900 banking offices throughout the West, it could truly be a force to reckon with.

It might even climb back up a few places in the card industry rankings, where it was No. 5 in American Banker's list on Sept. 20. Just to begin growing again would mark a turnabout.

Though BankAmerica is obviously no slouch, at $7.3 billion in receivables, that total has declined for three consecutive quarters, and the company has fallen from its pedestal as the creator of BankAmericard, the first nationally licensed bank card and predecessor of Visa, now the biggest card brand.

BankAmerica's history makes Mr. Sznewajs' job one of the more visible in the card industry. His boss' boss, vice chairman Thomas E. Peterson, occupies the BankAmerica seat on the Visa International and Visa U.S.A. boards.

Executives found themselves denying rumors earlier this year, coming out of an analysts' meeting, that they were thinking about selling some or all of the card business. In a more recent presentation, chairman Richard Rosenberg reportedly listed credit cards as one of the areas not likely to be downsized.

Mr. Sznewajs faces more than his share of challenges, many of which developed before his arrival from Valley National Corp. - now Bank One Arizona - last Feb. 1.

Signs of Recovery

At the end of 1992, net credit card losses after recoveries were at 6.16% of average loans, above average for the industry and almost double the level two years earlier. As the receivables declined 12% in the first nine months of this year, net credit losses fell by 19%, to 102 million, and the annualized char-geoff ratio improved to 5.5% on Sept. 30.

Optimism reigns, bolstered by clear signs of economic recovery - except perhaps in BankAmerica's home state of California.

Mr. Sznewajs, who is based in Phoenix along with 1,500 of BankAmerica's 2,000 credit card people (the rest are in Pasadena, Calif.), said there are also organizational and operational reasons for the recent sluggishness.

The complexity of establishing the credit card headquarters in Phoenix, which involved a move over the past two years from operating centers in San Francisco, was compounded by the BankAmerica-Security Pacific Corp. megamerger in 1992.

"That took a little steam out of the marketing effort and had an impact on our being able to move the business forward," Mr. Sznewajs said in a recent interview.

BankAmerica had to make some basic back-office decisions. Coming out of the merger with two operating systems - Bank of America's, which had its genesis in the early years of the business, and Security Pacific's, serviced by First Data Resources Inc. - the company embarked on creating an entirely new system.

Change in Processors

"After I came, we evaluated what we were doing and looked at some of the alternatives in the market," Mr. Scnewajs said. The result: BankAmerica entered contract talks with Total System Services Inc. of Columbus, Ga., First Data's closest rival in card processing and outsourcing.

Mr. Sznewajs said that Total's TS/2 software appeared to offer the features and functions BankAmerica had sought to unify its operations, while also having the flexibility to meet customer needs. He said an agreement could be completed by Jan. 1. His arrival itself was a change in the BankAmerica culture. He succeeded Tom Harkins, who decided to retire to his home state of Washington. Mr. Harkins had his roots in the company's Seafirst unit in Seattle, which accounts for more than $1 billion of BankAmerica's card loans.

Before Mr. Harkins, the operation was headed by Brian O'Hare, who moved to Norwest Corp. about four years ago.

Inherited from Valley

Mr. Sznewajs, 47, came to Phoenix in 1989 as Valley National's executive vice president of retail banking. He was responsible for all aspects of consumer banking and lending, including mortgages and credit cards.

He worked at Michigan National Corp. from 1973 to 1989. A certified public accountant, he rose to controller of the holding company and chief financial officer of its lead bank.

He then made his credit card name at Michigan National, which at one point in the 1980s was among the top 10 issuers. In 1989 he made an even bigger name engineering the sale of that $1.1 billion portfolio to Chase Manhattan Bank. Chase paid a healthy premium of 21%, or $228 million, and Michigan National did not even use an investment bank.

Mr. Sznewajs, who said his departure from Michigan National was "coincidental" with the portfolio sale, left behind a lot of admirers. One senior executive, whose tenure overlapped Mr. Sznewajs' by a couple of months, said: "I've never heard a bad word said about him. He has an excellent reputation."

Robert J. Mylod, chairman of Michigan National, joined the company in 1985, well after that reputation was established. It was Mr. Mylod's decision to sell the card portfolio - and to stay committed to the bank's sizable merchant processing and debit-card businesses.

High Marks

Mr. Mylod gave Mr. Sznewajs high marks for his management of the card business and for completing the sale agreement barely a month after the portfolio was put on the block. "He was bright, honest, and well directed," Mr. Mylod said.

At BankAmerica, the merchant business is separate from card issuing. So Mr. Sznewajs can focus full attention on the consumer - marketing, customer service, collections, and building relationships.

The idea of "leveraging" credit card and retail relationships is not new, as evidenced by the multi-account packages offered by major consumer banks, said K. Shelly Porges of Porges Hudson Marketing, San Francisco. And the opportunity is great, since most credit card customers are solicited without reference to their banking relationship.

"The real question is, how will they make it happen?" said Ms. Porges, who at one time worked at BankAmerica.

Mr. Sznewajs conceded that there are obstacles - notably the multiple operating systems that complicate training and need to be upgraded to allow for more sophisticated marketing and cross-selling.

But the organization and its people are not among those problems, Mr. Sznewajs said. He reports to James Jones, group executive vice president for consumer credit. Mr. Jones, in turn, reports to Thomas Peterson, who oversees nonbranch retail functions.

Branches Crucial

All are said to agree on the critical role of the branch network, a notion reinforced by the recent expansion of vice chairman Luke S. Helms' responsibilities to include branch banking in all 10 states. "We may have various organizational structures internally," Mr. Sznewajs said. "But to the customers we are all Bank of America."

On the theory that three or more "core relationships" essentially lock a customer into Bank of America, and that the credit card can be one of those, Mr. Sznewajs said one of his tasks is "branch support."

"We have to help the people in the branches to profile good customer prospects," he said. "A personal banker is not going to feel comfortable selling a product that the customer has little chance of getting approval for. So we have to factor those relationships into our score-cards, which is a big task."

He added that he does not see the tension that other banks have suffered between traditional credit card bankers and the consumer bankers responsible for deposits and debit cards.

"We don't have that competitiveness here," he said, citing the cooperation that resulted in the Arizona picture-card program, which is delivered through branches and covers both types of cards.

"We view ourselves as very relationship oriented," Mr. Sznewajs said. "A substantial portion of our outstandings are in our market areas, and that gives us a great opportunity to leverage. Nobody has the distribution system we do."

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