It may be just a matter of time before Moody's Investors Service lowers its ratings on MBNA Corp., market sources said.

Moody's has higher ratings on the nation's second-largest credit card issuer than any other rating agency. But it has had MBNA on 'negative outlook' off and on for the past year and a half, prompting some observers to predict the rating could be lowered.

"Yes, I think it is a possibility," said bank bond analyst Eric Grubelich of Keefe, Bruyette & Woods Inc. "I think the level of common equity capital is a real sticking point between MBNA and the ratings agency."

Moody's analyst David Fanger wouldn't predict future actions, but expressed concern over rising delinquencies and chargeoffs in MBNA's credit card portfolios. And he said Moody's is also keeping a close eye on the Wilmington, Del., company's rising leverage ratio.

A rating downgrade could make it more expensive for MBNA to raise capital, because investors would insist on higher yields. If the company's leverage is indeed too high, the company may be forced to curtail the growth that has made it such a fearsome competitor to banks.

Moody's rates MBNA's bank deposits A2, and the parent company's senior debt A3. Standard & Poor's long-term rating on the MBNA is A-, while is short-term rating is A2. S&P put MBNA on negative outlook in April said Standard & Poor's analyst Thomas Abruzzo, adding that concerns over the company's leverage could lead to a downgrade within a year.

Mr. Fanger said that Moody's continues to have concerns about MBNA's chargeoffs and delinquencies. In addition, Moody's is focusing on whether the rising leverage, as the company's assets swell faster than capital, warrants a downgrade.

Bank bond analyst Katharine Rossow, of Chase Securities Inc. said she expects MBNA to follow a pattern similar to Wells Fargo & Co. during the real estate crisis several years ago. "We are concerned about the sustained level of receivables growth going into a downturn in the sector," she wrote in a report. "Like Wells Fargo we do not believe that MBNA will be able to avoid all the pain in this cycle for the credit card industry."

Bank bond analyst Mark Girolamo of Bear, Stearns & Co. said he is not aware of an imminent downgrade by Moody's on the company but pointed out that MBNA's business characteristics remain superior.

"There is nothing to suggest any earnings problem for MBNA this quarter," said Mr. Girolamo, "but we have been a little worried about what the ratings agencies will do."

If one or both agencies downgrades the MBNA's bonds then spreads will widen, meaning that the bonds will lose value. Conversely, MBNA's capital raising endeavors will become more expensive.

Yet Mr. Girolamo noted "if people anticipate a downgrade then the bonds may not lose as much value, because it is already reflected in the price."

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