Corp.'s operations and can increase profitability by shedding some card units and focusing on home equity and consumer finance, according to a research report. BT Alex. Brown reiterated a "strong buy" on the stock of the Prospect Heights, Ill., lender in a report by analyst Mark Alpert. Branch originations are growing 10% to 12% annually, the Bankers Trust Co. subsidiary said. But Household's U.S. Visa and MasterCard units are performing poorly, it said; the company could improve return on equity to 25% from about 20% by shedding them. Household is strongly capitalized and generating excess capital that will be returned to shareholders, BT Alex. Brown said, but the stock has been a "disappointing performer" this year. From a 1998 high of over $50 in July it had fallen to about $39 in December. If Household does not successfully reposition its card business, or falters while reaping cost savings from the Beneficial merger, it could "find itself on the opposite side of the consolidation movement," the report said. The merger closed June 30, and so far the integration has gone well, BT Alex. Brown said, citing a recent visit to the company's headquarters. All Beneficial accounts have been transferred to Household systems, the report said, and all branches-there are 1,800, in the United States, United Kingdom, and Canada-will soon make Household's profitable unsecured personal loans. Beneficial's compensation system, which rewards performance, is being introduced at all Household branches, the report said. That is likely to increase yields, it said. The quality of assets generated through branches was expected to improve in the fourth quarter of 1998 as Beneficial branches adopted Household policies, BT Alex. Brown said. Household's reliance on securitization has been reduced, the report found. The company has not securitized a home equity loan in two years.

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