Bank of New York Co. is nearing the sale of its $4.2 billion credit card portfolio, and industry sources see Chase Manhattan Corp. as the likely buyer.

Though not publicly confirmed by either party, the deal is the subject of increasingly persistent rumors in the Delaware bank card community, where both organizations have operations.

It is taken as common knowledge that Chase officials have been poring over Bank of New York's books. Executive search consultants have gotten the word that senior Bank of New York talent soon may be fair game for recruiting.

A sale by Bank of New York would culminate one of the biggest strategic retreats in credit card history.

Chase, the third-largest in bank card balances according to The Nilson Report, would have about $30.5 billion of receivables, including Bank of New York's-about equal in size to the combined portfolios of recently merged Banc One Corp. and First USA Inc.

Bank of New York vaulted into the bank card top 20 on the strength of a low-interest rate strategy and the Union Privilege affinity program that it managed for the AFL-CIO through last year.

After almost 10 years working with the labor federation, Bank of New York lost the contract-and more than $3 billion of receivables-to Household International's Household Credit Services unit.

Bank of New York, which was hit hard last year by credit card loan losses, sold a smaller piece of its business this year to the Ford Motor Co. spinoff Associates First Capital Corp. That still leaves the New York bank 16th in the rapidly consolidating bank card game, according to an soon-to-be-published Nilson Report ranking.

Having dropped $4.3 billion of credit card balances, Bank of New York saw a decline in net interest income of 3% in the 1997 second quarter, to $489 million, and 4% in the first half, to $986 million.

The likelihood that Bank of New York is a step away from its final credit card exit has sparked other speculation about the $62 billion-asset company's future.

One theory is that the credit card sale is a balance-sheet-cleaning prelude to a buyout of Bank of New York Co. by a prominent superregional, such as NationsBank Corp., Banc One Corp., or PNC Bank Corp.

Alternatively, Bank of New York may simply have decided that the halving of its card portfolio over the last year meant that this could no longer be considered a core business.

Robert Burke, a former president of Bank of New York's card operation, said if the bank sells its card business it would probably use the proceeds to "boost its opportunities in securities processing"-a fast-growing sector where the company is emphasizing economies of scale.

Whatever course Bank of New York chooses, there seems little doubt that Chase is hot on the acquisition trail.

One executive recruiter reported hearing from inside sources that Chase is conducting a methodical review of Bank of New York's portfolio. Negotiations are said to have involved Catherine I. Marsh, president and chief operating officer of Bank of New York's card subsidiary in Delaware.

Senior managers within the bank's card group may have found out about-or drawn conclusions about-the potential sale before the bank was prepared to disclose it, fueling the gossip mill.

Industry sources do not believe that Chase is interested in acquiring any more of Bank of New York than the card business, in part because of the recently concluded megamerger with Chemical Bank.

Industry experts see synergies between Chase's and Bank of New York's card portfolios.

Bank of New York cobranding program with Toys 'R' Us Inc. "would be valuable to a bank like Chase, which has the Wal-Mart program," said Donald M. Berman, president of Cardholder Management Services in Plainview, N.Y. Cardholders in the two retailing programs might have similar attributes while complementing one of the industry's larger cobranding efforts, the Chase-Shell Oil program.

Sanford C. Bernstein & Co. analyst Ronald Mandle said it is entirely plausible that Bank of New York wants to sell its card business because "credit cards are not as important to their overall earnings" since the loss of the AFL-CIO contract.

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