Barnett Banks Inc. moved to dispose of its credit card problems Thursday by announcing a "strategic alliance" with Household Credit Services Inc. to manage most of the bank's $1.7 billion portfolio.

Under the two-part agreement, Jacksonville-based Barnett will sell $780 million of "noncore" card receivables directly to the credit card subsidiary of Chicago-based Household International.

The two companies will then jointly manage and build Barnett's remaining $1 billion portfolio, consisting of "core" customer relationships in Florida and Georgia.

"It's definitely a positive move because you're matching the marketing expertise of Barnett with the sophistication of a larger credit card services company," said analyst R. Harold Schroeder, with Keefe, Bruyette & Woods Inc.

Barnett, which has $40 billion of assets, had revealed in July that it planned to sell its card portfolio or make it a joint venture in the wake of rising credit losses.

Barnett's card chargeoff ratio rose to 6.4% in the second quarter, up from 6.1% in the first, compared to an industry norm of 5%.

Most analysts who follow Barnett had assumed that Barnett would attempt to jettison the problems in its portfolio while protecting its core credit card relationships. That view was borne out by the agreement announced Thursday.

"It was very clear talking to Barnett that they weren't interested in giving up control of the credit card business totally," said Moshe Orenbuch, with Sanford C. Bernstein & Co. "So this is sort of like the best of both worlds for them."

The agreement with Household continues Barnett's recent practice of developing strategic alliances with other financial services companies.

Earlier this year, Barnett announced a plan to service residential mortgages jointly with Bank of Boston Corp. Barnett also offers investment banking services through a joint venture with Stephens Inc., Little Rock.

Under the agreement, Barnett credit cards will continue to carry the Barnett brand. Barnett and Household will actively market Barnett-branded cards to current and prospective Barnett customers , with the two companies sharing profits generated from the new portfolio.

The $780 million portfolio that Barnett will sell to Household outright includes accounts held by customers who live outside of Florida, certain accounts of recently acquired customers, and other low quality noncore accounts.

Terms of the sale were not disclosed. Barnett said it will not recognize a material gain or loss on the sold portfolio and expects the transaction to be accretive to earnings per-share in its first year, 1997.

The transaction is expected to close in the fourth quarter of this year.

Household Credit Services is the sixth-largest Visa/MasterCard issuer in the country, with a $17 billion portfolio that includes the General Motors MasterCard.

In June, Household acquired a $3.4 billion portfolio belonging to the Bank of New York Co.

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