The market for bank credit card loans has picked up, as an improvement in consumer credit quality has driven up premiums for sellers.

Among the biggest companies seeking to take advantage of the favorable conditions is KeyCorp of Cleveland, which has decided that with $1.3 billion of card loans it does not have sufficient scale to compete with industry-leading portfolios many times that size.

Also on the selling block is Partners First, a Baltimore-based joint venture that had to respond to the fact that one of its owners, BankBoston Corp., recently pulled out in conjunction with its merger into Fleet Financial Group.

Buyers of card portfolios with $15 million or more of receivables are paying average premiums of 16.2%, up from 13.1% at this time last year, said Robert K. Hammer, an investment banker in Thousand Oaks, Calif., who brokers credit card deals and keeps statistics on this market.

Twenty portfolios worth about $15 billion have been sold this year, and another $9 billion of receivables are in the pipeline to be sold, Mr. Hammer said.

This year's volume is short of the $32.29 billion of credit card assets sold last year, but Mr. Hammer said activity usually picks up in the fourth quarter, when companies decide "to book income into a year that might need it."

Indicating that bank industry consolidation still has a way to go, the owners of six of the 20 largest bank card programs are evaluating sales of some or all of their portfolios, said Mr. Hammer, chairman and chief executive officer of R.K. Hammer Investment Bankers.

The acquisition strategy has been adopted by large companies that view this as the most feasible route to receivables growth, Mr. Hammer said. "It has been a seller's market for some time," he said, "but it is more pronounced right now because of good credit quality."

A number of factors -- including the decline in bankruptcy filings and in delinquent credit card payments -- have made portfolios healthier and raised their prices.

The number of people filing for bankruptcy is expected to decline this year for the first time since 1995, to 1.3 million from last year's record of 1.4 million petitions filed.

Also, delinquencies are falling. As of June 30, according to an American Bankers Association report, 3.33% of bank card accounts were at least 30 days past due, down from 3.58% three months earlier.

Another factor fueling portfolio sales is that Wall Street simply likes these deals, said Leigh Allen, director of Salomon Smith Barney, a firm that handles many of the largest transactions. "People who sell are seen as prudent, so the market gives kudos to companies that recognize that they can't compete. But buyers are also given kudos for effecting the industry consolidation."

Mr. Allen pointed to a number of deals completed this year in which the stock prices of the both the sellers and buyers went up.

KeyCorp spent nearly a year considering whether to sell its credit card business and formally told analysts last month about the likelihood of a sale. "It's not a significant-sized business in an industry that is consolidating around large players," said KeyCorp spokesman Bill Murschel.

Partners First was formed two years ago by BankBoston, Bank of Montreal's Chicago-based subsidiary Harris Bankcorp, and First Annapolis Consulting of Linthicum, Md. The venture's goal was to help banks with modest card portfolios stay in the business by outsourcing portfolio management services.

BankBoston's recent merger, which formed FleetBoston Financial Corp., led one of the two founding partners to withdraw. In an interview with American Banker in March, John R. Soderland, president and chief executive officer of Partners First, said the venture had $2 billion of receivables, just a start toward the $15 billion to $20 billion it had hoped to amass by 2003.

Bank of Montreal spokeswoman Denny Allen said Partners First "couldn't go on without a big capital infusion," an option her company vetoed.

"I'm not sure why Partners First has been unsuccessful, but it's not surprising given the fact that Bank of Montreal owns 90% of the company," said Donald M. Berman, president of Cardholder Management Services in Plainview, N.Y. The eventual aim "was to have various banks have ownership."

Smaller banks with portfolios of up to $50 million are also taking hard looks at their card businesses, said Eric Eberhard, vice president of National Loan Exchange Corp., a St. Louis company that handles deals of that size.

Mr. Hammer said the small-bank portfolios tend to have fewer credit-quality problems than those of large banks so that there is no desperation to sell. He said he sees the greatest activity in portfolios of $1 billion to $5 billion.

Industry sources said one example is a $1 billion package from Bank of America Corp., consisting of accounts outside its branch network. A spokeswoman for the Charlotte, N.C., holding company would not confirm or deny the rumor.

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