revealed different reactions to a perceived shift in MBNA Corp.'s mix of credit card products. Moody's, which has a higher opinion of MBNA than S&P does, changed its outlook Monday to negative from stable. S&P raised its outlook to stable from negative, reflecting confidence that its ratings are appropriate to MBNA's current customer base. Moody's change reflects concerns "about how their franchise is developing," said David Fanger, Moody's credit card analyst. MBNA has pioneered the use of affinity cards, tied to customers' membership in organizations such as alumni groups and trade organizations, among other groups. "Our view is that unlike some of their more traditional affinity programs, which were endorsed by a particular organization, in these newer types of programs the affinity of the cardholder is weaker," said Mr. Fanger. He cited the state series, in which an image of the cardholders' state is shown on the card. Alison B. Emmerich, S&P's credit card analyst, acknowledged that MBNA has changed the mix of its products away from programs that hinge on a strong affinity on the part of the consumer. But she argued there is little cause for immediate concern. MBNA, for its part, disagrees with Moody's assessment of its client base. "We've been marketing to groups with a common interest for 15 years whether or not they are a part of an affinity group with a formal membership list," said Dave Spartan, senior vice president of investor relations at MBNA. Mr. Spartan said that the characteristics of the credit card company's new customers were consistent with that of the overall portfolio. Bank bond analyst Allerton G. Smith of Donaldson Lufkin & Jenrette said that MBNA knows how to price risk. He anticipates that the bank will do so as well with its new cards as it has with others. "They'll continue to do better than average in delinquencies and loss rates," Mr. Smith said. Also a factor in Standard & Poor's thinking was an issue on Monday of $150 million in convertible, cumulative preferred stock. The agency had lowered the outlook to negative three months ago because of concerns about capital levels and financial leverage. "This issue is just evidence of a commitment on MBNA's part to maintain a reasonable level of financial leverage," said Ms. Emmerich. Ms. Emmerich said that S&P gives a limited amount of credit to preferred stock in the capital base, because it is a way of leveraging the common stock. However, since MBNA has had not issued preferred stock before, it is within the agency's guidelines to give the company capital credit. MBNA, for its part, said that it had brought its recent preferred issue to market to diversify its funding sources and to allay S&P's concerns. "The issue provides us with a long-term source of funding and access to a different investor base," said Mr. Spartan. "We saw this issue as a way to obtain a long-term source of funds and deal with S&P's concerns without diluting our common stock," he said. Mr. Spartan said that there is a strong divergence of opinions among agencies regarding credit card companies. Although the moves by S&P and Moody's appear in opposition, they actually bring the rating agencies closer together on the highest rated credit card company for both agencies. Moody's currently rates MBNA's debt higher than S&P does. "The situation before the outlook changes was a bigger discrepancy," said Michael Leit, a bank bond analyst at Prudential Securities Inc. "It's not so surprising in that Moody's rating is a notch higher, and it just puts the ratings closer."

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