Fleet Financial Group's agreement last week to buy $600 million of credit card receivables from Crestar Financial Corp. underscores the Boston company's aspirations to be a strong, nationwide marketer.
The sale, at an 8% premium and representing more than half of Crestar's $1.1 billion portfolio, came almost five months after Fleet went national by buying Advanta Corp.'s $10.5 billion of credit card receivables.
Buying Advanta "was a way to tell the public we want to be in the credit card business," said Joseph Saunders, chairman and chief executive officer of Fleet Credit Card Services. The Crestar deal, he said, is a "strategic play."
Mr. Saunders said Fleet liked the Crestar portfolio partly because of the stability of its customers. Most have been customers for almost five years, but they are away from Richmond, Va.-based Crestar's Middle Atlantic geographical focus and were not considered "core" customers.
Though some large card issuers-like Fleet and Providian Financial Corp.- are acquiring portfolios to stake claims on the national issuing scene, Crestar, First Union Corp., and others want their card businesses to augment their individual banking accounts.
To focus more squarely on customers in the Maryland, Virginia, and Washington region, Crestar has pared its portfolio from $1.7 billion in 1995 to $500 million after the sale to Fleet, which is expected to close this quarter. Crestar expects a net gain of $54 million.
The move is "in line with what we have been doing and saying," said Crestar spokesman Barry Koling. "Crestar is concentrating on establishing relationships with customers that go beyond just a credit card."
From now on, "the credit card loans we will have will be in our geographic footprint," he said.
The sale will eliminate 75 jobs in Crestar's card unit. Employees will be able to apply for other posts. Those who do not accept new jobs will be given severance packages, Mr. Koling said.
Michael Plodwick, an analyst at Lehman Brothers in New York, said Crestar's card portfolio has dragged down its overall financial performance. Of the banking company's $25.1 million of chargeoffs in the first quarter, $20.5 million was in card loans.
Mr. Plodwick said the loss distorted the company's overall credit picture.
"This transaction makes their credit quality look better," he said, because it moves the bulk of chargeoffs "out the door."
Fleet, on the other hand, expects the acquisition to bolster its strategy and improve performance.
The deal is in keeping with a desire to "add to its portfolio and promote economies of scale," said Diana P. Yates, an analyst at A.G. Edwards.
Ms. Yates said some of the larger card issuers-Citicorp, Banc One Corp., and Chase Manhattan Corp.-"have found their niche" on a national or even international scale "and learned to manage that business quite well." Fleet, she said, has begun to enter that category.
Mr. Saunders said Fleet may well be open to further acquisitions.
"As these deals come to market, we will look at them," he said. "We recognize we are in a consolidating industry, and we are not going to dismiss anything."