Shares of the credit card monolines Providian Financial Corp., Metris Cos. Inc., and MBNA Corp. rose Monday on talk that all three could be acquisition targets.
Thomas K. Brown, the chairman of the New York investment fund Second Curve Capital, wrote in a report released Monday that Metris, of Minnetonka, Minn., and Providian, of San Francisco, are both under pressure to sell.
And over the weekend Barron's Online reported that MBNA, of Wilmington, Del., might be in play for $50 billion, and that American Express Co. and HSBC Holding PLC were possible acquirers. It said MBNA's stock price does not adequately reflect performance.
In an interview Monday, Mr. Brown, whose firm is Metris' second-largest stockholder and also owns Providian shares, said the improving economy makes subprime specialists more attractive than they had been over the past two years.
In addition, he said, it is expensive for standalone issuers to fund receivables, and both companies have lost some scale. "That is what is forcing the sales," Mr. Brown said.
Reportedly, Providian engaged in talks with Barclays PLC in February but they could not agree on price. Mr. Brown said the British bank was interested in buying only the assets but may be taking a second look because Providian's credit losses have kept falling.
"They wanted to see Providian make more progress, and now I think Providian will be able to justify its price," he said.
As for Metris, Mr. Brown noted that HSBC has already purchased some of its receivables and owns Household International, another subprime lender. "They understand that segment," he said. He called HSBC a likely buyer.
But some say Metris and Providian are not ready for a sale.
One analyst, who requested anonymity, said both companies need to demonstrate more improvement to garner a premium. He pointed out that Providian has lower receivables ($16.68 billion) and fewer accounts (10.3 million) than it did at yearend.
The company's attempt to move from subprime to mass-market customers is an unproved strategy, and even if successful it might reduce revenues, because more creditworthy customers pay fewer late and other fees, the analyst said.
Providian earned $101.7 million in the first quarter, and Metris $41.6 million - its second profit after five quarters of losses.
First-quarter loss rates at both issuers could give some purchasers pause. Providian's was 13.88%; Metris' was 17.8%, with $7.5 billion in managed loans.
Spokespeople for Metris, Providian, and American Express would not discuss whether the companies are for sale, and a call to Barclays was not returned at press time.
James Donohue, a spokesman for MBNA, said: "It is difficult to imagine a business combination that could deliver better prospects than what we have today."
At an investor conference Friday, Amex chairman Kenneth I. Chenault cast doubt on the idea of buying a big company.
"Given the strength of our organic and expanded opportunities, we don't need to make acquisitions to meet our shareholder targets," Mr. Chenault said. "Therefore, the ones we do make can be targeted, selective, and prudent."
Metris' shares rose 8.9% on Monday, Providian's 3%, and MBNA's 3.2%.
