GE Capital Services and Bank One Corp.'s First USA subsidiary said Monday that they are linking arms to improve their respective positions in the credit card market.

The companies agreed, essentially, to a trade: GE Capital's U.S. MasterCard and Visa business for First USA's private-label card portfolio.

The $2.2 billion of MasterCard-Visa receivables, though controlled by First USA, would keep the GE label under a cobranding arrangement.

Meanwhile, a fifty-fifty joint venture, Monogram Credit Services LLC, would take ownership of $1 billion of GE private-label receivables and $1.6 billion from First USA, with GE serving as managing partner.

Financial terms were not disclosed for the unusual, multifaceted agreement, which is expected to be consummated by yearend.

It plays to the two financial industry giants' strengths. GE Capital Consumer Financial Services is the largest issuer of private-label cards, typically for retailers, and First USA is apparently about to surpass Citibank as No. 1 in bank card loans.

Richard W. Vague, First USA's chairman and chief executive officer, called the deal "a win-win" and "an opportunity to build stronger customer relationships."

Edward D. Stewart, GE Capital executive vice president, said it makes both companies "much stronger players in the credit card industry, both individually and as a team."

GE never became the giant in general-purpose credit cards that it is in private-label and other financial and nonfinancial business lines. Its selling off of MasterCard and Visa accounts follows the pattern of leaving businesses where the company decides it cannot be a leader. (In the corporate finance area, GE is expanding in syndicated lending. See page 29.)

On credit cards, GE's familiar logo and its flagship product, GE Rewards, will be perpetuated through cobranding.

A GE Capital spokesman said the company is retaining its corporate and international credit card businesses, with $2.3 billion of receivables. And it is turning only a fraction of its $16 billion of private-label receivables over to the Monogram Credit joint venture.

First USA, similarly, is deciding which of its businesses are "core." James L. Accomando, a consultant in Fairfield, Conn., who worked on the deal with GE, said the First USA private-label accounts in Dayton, Ohio, were owned by Bank One before it acquired First USA last year. It had recently lost several key clients, including Sony.

Industry experts said the arrangement has particular significance for the private-label sector. This year, Household International's acquisition of Beneficial Corp. and Associates First Capital Corp.'s purchase of SPS Transaction Services Inc. were significant consolidation moves in the field.

John C. Grund, a principal at First Annapolis Consulting in Linthicum, Md., called 1998 "a watershed year" in the private-label industry. These transactions illustrate, he said, that the general-purpose and private- label facets are not necessarily complementary.

"If there were all these synergies and leverage opportunities, why would Bank One want to shed its private-label business and why would GE want to shed its bank card business?" Mr. Grund said.

GE Capital of Stamford, Conn., manages private-label programs for more than 300 retail clients with 70 million cardholders. Home Depot and Macy's are among its marquee accounts.

Under the joint venture, "both companies will work together to pursue private-label card business in the United States," said Neal McGarity, a GE spokesman. The arrangement "was a carefully conceived competitive response to the consolidation that's sweeping the industry."

First USA's private-label accounts are dominated by medium-size retailers of furniture, electronics, and jewelry.

"Our expertise is in the MasterCard and Visa bank card business," said George McCane, a spokesman for First USA in Wilmington, Del. "The private- label business is an area where we will benefit from having the scale that GE brings to the partnership."

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