Smith Barney Shearson initiated coverage Tuesday of three specialized credit card issuers, saying stocks of the companies trade well below their earnings growth rates.

Analyst Kristina E. Andersson awarded a "buy" recommendation to First USA Inc. and "outperform" ratings to both MBNA Corp. and Advanta Corp.

"Profit taking may well continue in the [financial] group," she said, "but the earnings growth these companies can achieve is very real, and they are now trading at big discounts to their growth rates."

Robust Profit Growth Seen

First USA, she said, trades at 18 times prospective earnings but may well achieve a 40% earnings growth rate during the next few years. MBNA trades at 13 times anticipated earnings with a likely 20% earnings growth rate, and Advanta is at 16 to 17 times earnings with a projected growth rate of at least 20%.

Tuesday afternoon, First USA was off 12.5 cents a share, to $33.375; MBNA Corp. was down 12.5 cents, to $32.75; and Advanta was down a sizable $1.875, to $38.375.

Ms. Andersson said she was not surprised by weakness in the stocks.

"The appreciation in this group has been tremendous," she said, "and people are taking profits. There is a lot of tax-related selling going on."

In addition, she said, "we've got the sector-rotation factor in play with a lot of people feeling they need to get out of interest rate-sensitive stocks."

But the specialized card issuers offer convincing reasons for investment, she said.

"We are not arguing there will be a renewed consumer spending binge," she said. "It's a market-share game, and a select few companies have figured out how to play the game."

Thinking Small Pays Off

Many banks that have large credit card operations are continuing to use a broad-based approach, she said, while the card issuers have eschewed "the mass marketing of the '80s" in favor of more carefully tailored marketing approaches.

"These companies understand how to make the business profitable on an account-by-account basis," she said.

In the market Tuesday, bank stocks were mostly mixed as investors continued to await today's House vote on the North American Free Trade Agreement.

Among those with gains, First Union was up $1 a share, to $40; Mellon Bank Corp., $1, to $53.875; and Northern Trust Corp., 75 cents, to $38.75.

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