Despite recent increases in credit card delinquencies and chargeoffs, several industry leaders have strengthened their market positions, an annual American Banker survey shows.
Of the top 50 institutions in the bank card business, eight increased their managed loans by more than 30% in the 12 months through March 31.
The largest growth rates came from card lending specialists Advanta Corp. (69%), Capital One Financial Corp. (27%), First USA Inc. (53%), and MBNA Corp. (37%). All benefited from highly systematic approaches to mass customization and risk analysis.
Such highly focused "monoline" companies "have developed the technology and the systems to efficiently analyze credit risk and target market to customers who are most likely to respond to offers and revolve balances," said Michael J. Freudenstein, analyst at J.P. Morgan & Co.
Growth leaders among the more traditional banks included First Chicago NBD Corp., up 32% to $17.5 billion in card loans, adjusting for last year's merger with NBD Bancorp.
Banc One Corp. of Columbus, Ohio, moved up two notches, to ninth, by increasing its managed card loans 41%, to $12.2 billion.
Traditional banks, thrifts, and diversified financial institutions all posted substantial annual increases, but the last group seems to be ahead of the game.
The 16 nonbanks' and diversified companies' share of the top 50 total receivables grew 2 points, to 30.4%, at $129.6 billion.
At the same time, the 34 traditional banks and thrifts on the list had a combined share of 51.8%, with $220.5 billion in managed loans.
The top 50 companies in managed credit card loans command 82.2% of the total market.
First USA moved from sixth place to fifth as its managed card portfolio surged by 53%, to $18.3 billion. The Dallas-based company, owner of a card- issuing bank in Delaware, first made its mark with low-rate cards and has broadened its strategy to include cobranded and affinity products.
Among the top five card companies, First USA also had the lowest chargeoff rate for the first quarter, writing off 2.02% of loans on an annualized basis.
MBNA, the Wilmington, Del.-based company that ranks third - behind Citicorp and Dean Witter, Discover & Co. - may have an even bigger advantage.
"MBNA spends more time on the credit process than virtually any other card issuer," said Moshe Orenbuch, an analyst with Sanford C. Bernstein & Co.
The affinity card specialist ended the first quarter with a low 2.55% chargeoff rate.
"MBNA will have a lending officer and a computer module to review applications," he said. "They end up with lower losses, but higher credit lines. Its orientation helps both in terms of its ability to identify high value-added customers and to be smarter about the payment and fault characteristics of those people."
Mr. Orenbuch added that an issuer who just uses a credit bureau score is finding the environment changing too rapidly.
Capital One of Falls Church, Va., climbed one place to 11th, with $10.1 billion of outstandings. Advanta, of Horsham, Pa., gained six places, moving to 10th, with a $11.6 billion portfolio. Among the top 50, Advanta had the largest increase in managed loans at 69%.
A newcomer to the top 50, at No. 48, is Travelers Group of New York, with a managed loan portfolio of $818.3 million.
The rapid growth may be associated with a less welcome trend.
Noncurrent credit card loans as a percentage of loans on the books for the top 50 averaged 1.64%. Within that figure, nonbanks averaged 1.83%, compared to banks and thrifts at 1.54%. All FDIC banks had an average of 1.70% noncurrent loans.
Nonbanks' annualized net chargeoffs as a percentage of managed loans were 4.44% versus banks' and thrifts' 4.37%.
"There are a lot of opportunities out there for at least three more years (of growth). The driving force behind the rapid growth in market share is mass customization," said Mr. Freudenstein.
Even though surveys for the past year show rapid expansion of the amount of managed loans held by the top 50 across the board, "I think that will change in the coming months," said John Russell, a Banc One spokesman.
"Banc One, like other issuers, has started to apply more stringent measures when assessing credit risk," Mr. Russell said. "We have raised the hurdle on our scorecards. Credit standards need to be in sync with economic cycles."
However, Bank One had relatively high 4.93% of its loans on the books charged off at the end of the first quarter.
Industrywide data for the second quarter indicate that card marketers are becoming more cautious in customer solicitations and more adept at identifying problems in their portfolios.
Veribanc, a Wakefield, Mass.-based banking research firm, said the growth in outstanding credit card debt and the rates by which credit limits expand slowed in the second quarter.
A survey by R.K. Hammer Investment Bankers in Thousand Oaks, Calif., also indicated that card issuers are tightening credit standards.
The survey, conducted in June and July, found six of 10 issuers had stepped up collection activities; seven of 10 changed credit policies; and four of 10 revised applications to provide more and better data.