Credit and charge card issuers face the potential for worse credit losses than in previous economic cycles, but shares in the card specialists are still a good buy, a recent report by Sanford C. Bernstein & Co. concludes.

Bernstein analysts maintained "outperform" ratings on First USA Inc., American Express Co., MBNA Corp., Dean Witter, Discover Co., and Capital One Financial.

They placed a "marketperform" rating on Advanta Corp., but analyst Moshe Orenbuch noted that the Horsham, Pa., firm has maintained its profit margins better than expected since the rating decision was made.

The specialists are less vulnerable to credit quality concerns than many banks, Mr. Orenbuch said, because they "have a more rigorous marketing and tracking approach."

Card programs of Mellon Bank Corp., Norwest Corp., and Barnett Banks Inc. among other nonspecialists have experienced unexpected losses in the past year because the banks were not as attuned to budding problems as the specialists would have been.

"Issuers who are constantly in the mail and also tracking results have better early warning systems," Mr. Orenbuch said. The tracking ability of the specialists enables them to take positive steps to avoid problems, he said. "If things are not working as well from a credit perspective you can change your pricing."

The Bernstein report estimated losses in the next economic downturn would peak at 5.5% - compared with a peak of just over 5% in the previous economic cycle. Information technology will partially offset the impact of this negative trend, the report said.

Even though nonspecialists are less equipped to respond to falling credit quality than specialists, Mr. Orenbuch said he saw little likelihood of a material effect on bank earnings from credit card losses. Credit cards account for far less than 10% of bank earnings, he explained.

Mr. Orenbuch said some of the concerns that have been raised about the credit card business have proved to be exaggerated.

For example, some analysts had worried that when interest rates rose, profit margins would shrink. They reasoned that issuers would be reluctant to raise card rates when competition for accounts was so intense.

But Mr. Orenbuch said major issuers have now established a track record of keeping pace with rate hikes.

In trading Thursday, card issuers were mixed as banking stocks in general declined. First USA shares fell 37.5 cents to $50.125. Capital One shares were up 12.5 cents to $26.75. Dean Witter shares fell 87.5 cents to $53.75; and MBNA shares gained 25 cents to $45.875.

Class A Advanta shares rose 75 cents to $47.75, while the class B Advanta shares gained 75 cents to $45. American Express shares fell 12.5 cetns to $45.875.

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