to leadership in credit cards. And it has succeeded, to the extent that its name follows those of Citicorp, First Chicago, Bank of America, and a few others on any list of the bank card elite. But NationsBank hasn't lived up to its own expectations - or matched the leaders' growth benchmarks. Three and a half years ago, Kenneth D. Lewis, then president of general banking, said he hoped card receivables, then $4 billion, would triple in three years. Receivables have grown to $6 billion, 14th highest in the business. In a recent interview, Eileen M. Friars, who joined NationsBank in 1991 as president of card operations, said, "Our goal is to aggressively grow the business," and $12 billion is "reflective of where we want to go." NationsBank maintains that Mr. Lewis, who is now president of the company, reporting to chairman Hugh McColl, based his earlier comment on an assumption that the bank would buy credit card portfolios. That part of the strategy fell flat, with few portfolios available, leaving internal growth as the only option. Meanwhile, NationsBank lags behind some of its peers among the top 15 card issuers. At the other banks, card receivables typically make up 10% to 12% of total domestic lending, said James L. Accomando, a consultant in Fairfield, Conn. NationsBank's managed credit card receivables account for just 5.9% of its domestic portfolio. Sanford C. Bernstein & Co. analyst Moshe Orenbuch said the banking industry aggregate is 7% - and that includes banks that do not issue credit cards. "Based on NationsBank's asset size, the card business is very underutilized," said Mr. Accomando. "There is a ton of room for growth." Chrysler Corp. could have transported NationsBank to that next level. Last year the automaker seriously considered entering the cobranding fray. Its competitors, General Motors and Ford, already had been successful offering bank-issued credit cards. According to a source close to the discussions, Chrysler decided in the final hour, after it was clear that NationsBank would be the card issuer, that it didn't want to launch a program after all. The General Motors MasterCard has fueled the growth of its issuer, Household Bank, since September 1992. It has produced the bulk of Household's $11.1 billion of receivables, an indication of what Chrysler might have done for NationsBank. Nevertheless, NationsBank persevered, snagging one of the largest cobranded deals announced this year. The card program, with Viacom Inc.'s Blockbuster Entertainment Group, was hailed as a coup for the bank. The fanfare of a national advertising campaign, premiering during the Academy Awards ceremony and buoyed by supermodel Cindy Crawford as the spokeswoman, was sure to attract a substantial customer base, said industry watchers. NationsBank has opened 650,000 accounts in a little more than seven months. Ms. Friars would not confirm the number of accounts, which was provided by a Blockbuster spokesman, but she said NationsBank is "very pleased with the consumer response" to the program. Given the apparently high advertising and promotion budget, industry experts say NationsBank should be disappointed in the Blockbuster results. While 650,000 accounts is respectable, said K. Shelley Porges of San Francisco-based Porges/Hudson Marketing Inc., "my guess is that NationsBank was expecting at least one million accounts." Others echoed her suspicion. Ms. Friars pointed out that, "historically, I think very few programs have had one million accounts in six months." Of course, the Blockbuster program still has time to reach that milestone. Despite perceptions that the partners had not sustained their advertising campaign, Ms. Friars said, a national television ad in selected markets was launched in the fall. The most recent advertisements do not feature Cindy Crawford. "This time we highlighted the benefits of the card," whereas the initial push simply "got the word out," said Ms. Friars. Perhaps growing at a slower pace is not so bad, Mr. Orenbuch suggested. "NationsBank has expanded in a prudent way," he said. Anita Boomstein, a partner with Hughes Hubbard & Reed who specializes in cobranded partnerships, observed that NationsBank has aggressively bid on some cobranded deals, but that it has a conservative approach. Ms. Boomstein asserted that some issuers are willing to pay partners more to sweeten the deal. That does not seem to have been the problem, however, in NationsBank's relationship with Start Inc., which terminated its contract with the bank in June. The Herndon, Va., marketing company approached NationsBank about three years ago with a patented idea for a credit card with rebate features. The rebates, ranging from 1% to 7% of purchases made at approximately 20 retailing partners, went into an insured escrow account or into an annuity with Metropolitan Life Insurance Co. The retail partners included such heavyweights as Hertz, MCI, Spiegel, and Club Med. Start and NationsBank had high hopes that were eventually dashed, leaving both partners saying they are wiser to the pitfalls of cobranding relationships. Rick W. Hartt, former president and chief operating officer of Start and now a member of the company's board, believes the partnership lasted longer than it should have. "NationsBank was limiting us and our ability to negotiate with another issuer," said Mr. Hart. Since the companies parted ways, Mr. Hartt said Start hired Auriemma Consulting Group Inc. of Westbury, N.Y., to find another issuer, most likely a nonbank, to relaunch the card. At the heart of the partnership's demise appears to be a fundamental difference in the companies' expectations of each other. Mr. Hartt maintains that NationsBank "failed to live up to its marketing commitment." By the time the program ended there were only about 30,000 accounts - far less than the 300,000 to 500,000 accounts Mr. Hartt said Start expected. Start, it seems, was counting on NationsBank to peddle the card to its customers and to outside prospects. D. Scott Collary, NationsBank's vice president of partnership marketing, disagreed, saying, "It was Start's responsibility to build the membership base," NationsBank, still the owner of a $2.5 million stake in Start, was just one of its partners, Mr. Collary said. Alvin P. Perkinson had the unique perspective of someone who worked for both Start and NationsBank. A former product manager for the Start program at NationsBank, he subsequently joined Start as director of sales. He said the partners' conflict centered on Start's failure to sign a major retailer like J.C. Penney or Sears. Mr. Perkinson claimed that NationsBank's commitment to the program was contingent on Start's ability to corral such a retailer. As a newcomer, however, Start felt it needed the clout of NationsBank and Metropolitan Life to attract merchants. Mr. Perkinson and Mr. Hartt also pointed to the fact that new executives at Start and NationsBank were brought on at a critical point during the partnership. Robert E. Stock joined NationsBank in 1993 as marketing director and brought with him a different vision of "how to build a credit card portfolio, shifting the bank's priorities," said Mr. Perkinson. Mr. Stock was dubious of the Start program, according to the Start executives. Mr. Perkinson's departure from NationsBank also may have cooled the relationship, since he was Start's main advocate within the bank. "The more successful (cobranding) programs tend to be ones that have large customer bases," said Mr. Collary. Start Inc. had no customers. Start had more to lose by ending the partnership, since the card was its only source of business. "We really didn't want to walk away from the deal because of NationsBank's name recognition, but we learned, just like everyone else, about the ups and downs of these relationships," said Mr. Hartt. Still, it is NationsBank, the larger and more influential partner, that becomes the focus when such an alliance ends. Industry observers view the failure of the Start program as a blemish on NationsBank's credit card reputation. "It is hard to say from the outside that NationsBank doesn't have a focus, but it is not evident," said consultant Michael Auriemma. Another industry expert said that an executive close to the bank expressed frustration about the numerous projects NationsBank has in the works, none of which are expected to boost growth significantly. NationsBank was in the spotlight nearly two years ago for issuing the controversial Prime Option MasterCard. It was a significant development, because the card belongs to Dean Witter Discover & Co., which was embroiled in litigation with Visa over Dean Witter's right to use the Visa brand. Some bankers vilified NationsBank for giving a nonbank "back door" access to the bank card business. Prime Option was supposed to offer an alternative to high-priced bank cards, but by the time it hit the market it did not look much different from its competition. Analysts say that Prime Option is of negligible importance to NationsBank. A spokeswoman for Dean Witter, which services and markets the product while NationsBank owns the receivables, said Prime Option is being actively promoted. But most observers say the card simply faded away. NationsBank also issues the USAir and Southern Living magazine credit cards. In praising the Southern Living product, Mr. Collary said it benefits from the magazine's loyal customer base. Southern Living is representative of the kinds of "quality programs" NationsBank is interested in, said Mr. Collary. It is precisely such small to medium-size programs that industry experts say NationsBank should focus on. "It is apparent that NationsBank is looking for that big hit," said Mr. Accomando, "but there isn't much left that is home run material."

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