Continuing a string of acquisitions of midsize portfolios, MBNA Corp. announced Wednesday that it will buy Comerica Inc.'s $500 million of retail credit card loans.
The deal includes all of Detroit-based Comerica's consumer and small-business card accounts but no commercial card accounts. The sale is expected to close in the first quarter; financial terms were not disclosed.
Last year MBNA made some smaller acquisitions, but also a couple of midlevel ones. The Wilmington, Del., company bought the $2.7 billion portfolio of PNC Bank Corp. and the $1.5 billion portfolio of SunTrust Banks Inc., which also included accounts from Crestar Financial Corp.
The giant monoline card company will buy 300,000 accounts from Comerica, the 44th-largest card issuer. Comerica said it no longer has the marketing and operating scale to profitably expand its credit card business.
The deal, which includes a five-year agent bank relationship, is in keeping with MBNA's strategy of pursuing ongoing relationships with companies whose portfolios it buys. In these arrangements MBNA owns and services accounts under the seller's name and can continue to receive a stream of new accounts.
"There's a definite shift from smaller to larger for MBNA," said Robert Hammer, chief executive officer of R.K. Hammer Investment Bankers in Thousand Oaks, Calif. "In the years past you would always count on them to buy the smaller, highest-quality portfolios" - in the $25 million to $100 million range.
But MBNA vice chairman David W. Spartin said his company has not targeted portfolios of any particular size. What has happened, he said, is that industry consolidation has left larger portfolios on the selling block.
"We are always looking for high-quality credit card portfolios to acquire that would supplement our internal growth," Mr. Spartin said. In the last four years MBNA's acquisitions have represented roughly 15% of its growth, he said. Last year the company expanded its internal portfolio by $8.5 billion and at yearend had $72.3 billion of managed loans.
Mr. Hammer said MBNA, known for buying high-quality portfolios, may not have sought out larger acquisitions in years past because nationwide solicitation, often necessary to increase a portfolio, tends to result in higher loan losses.
Other banks might buy portfolios with higher chargeoffs "and try to improve them, try to change the stripes," Mr. Hammer said. MBNA does not "try to buy something and change what kind of creature it is."
But the Comerica loans are high in quality, as were those in the larger portfolios that MBNA bought last year, Mr. Hammer said.
Now MBNA is "clearly capable" of buying portfolios of any size if the loan quality meets its standards, he said.