NEW YORK -- Bank of New York Co.'s rapid credit card growth will not be deterred by the aggressive marketing campaigns of other issuers, chief executive J. Carter Bacot said.
"They are still nowhere near us," he said, referring to the on-slaught of low-rate, no-annual-fee competitors.
Bank of New York's interest rates are four to five percentage points below most of the competition, chief financial officer Deno Papageorge said.
Profits Said to Be Growing
Bank of New York's cards outstanding rose by 22% in the first quarter to 4.8 million from a year ago. Mr. Bacot said that card profits are growing at an above-20% annual rate, which he sees as "sustainable over the next couple of years.
"We know we are going to have a good 1994 in credit cards, which should roll on in 1995," Mr. Papageorge said.
He said that if the economy grows, so will the number of cardholders. He said this growth should eventually stabilize at 8% to 10%. But he said that once the costs of acquiring new cards are absorbed, card earnings should be even stronger.
Going After New Business
Bank of New York has been aggressively courting new card business in the last several years and was one of the first to offer a low-rate, no-fee card. It is the seventh largest U.S. bank credit-card issuer.
Mr. Bacot also said that his bank's credit quality standards are not being sacrificed to win credit-card growth.
Drop in Delinquencies
Credit-card delinquencies usually hit a peak about 12 to 15 months after an account is added. "We are at the 12 to 18 month mark, and there are no problems," Mr. Bacot said. "We have to keep credit standards high with a low-rate card."
Mr. Papageorge said that "the number of delinquencies was lower in December than it was in the six previous months."
Bacot said Bank of New York has no interest in buying credit-card portfolios, given its strong internal growth rates.
Mr. Bacot projected overall loan growth of about 3% percent in 1994, spurred by credit cards but offset by some nonrenewal of lower-yielding loans as they come due. Loan runoff includes indirect consumer loans, made through intermediaries like car dealers, and international loans.
Credit cards contribute 22% of Bank of New York's profits. It reported record 1994 first-quarter earnings of $178 million, or $1.75 per fully diluted share, which Mr. Bacot said was ahead of budget for the year.
He declined to comment on whether the bank would meet analysts' 1994 earnings estimates of $6.75 a share. It earned $5.44 per fully diluted share in 1993. He said 1994 earnings would definitely beat 1993 levels.
Mr. Papageorge said Bank of New York is not overly sensitive to rising rates, and despite the 50 basis-point rise in short-term rates in the first quarter, its spreads widened.
"With the rise we've seen at the start of the second quarter, we will maybe get some tightening in the spread. But we should be able to hold, plus or minus one or two basis points," he said.