Mellon Bank Corp., plagued by credit losses in its card business, has hired an executive with expertise in risk management to run the operation.
Ray Duggins, 43, will join the Pittsburgh-based bank this month as senior vice president in charge of credit cards. Most recently he was vice president of credit risk policy at Sears Credit Group, which manages the giant retailer's private-label card.
Mr. Duggins succeeds Kerry Ryan, who is retiring after 34 years at Mellon. Mr. Ryan, 55, will assist in the transition to Mr. Duggins' leadership through yearend.
James J. Dever, a Mellon spokesman, said the change in executives is simply the outcome of Mr. Ryan's decision to retire early. Others view the change as a result of credit losses generated by Cornerstone, Mellon's flagship card product.
"It's not surprising that the bank would change the person running the business," said Donald M. Berman, president of Cardholder Management Services, Plainview, N.Y., "because the card portfolio has not met expectations."
Cornerstone, introduced in 1994, gives cardholders a partial rebate on interest charges for 20 years and a total rebate after 20 years. Mr. Berman estimated that Cornerstone accounts for 50% of Mellon's card portfolio and 80% of its growth.
In the fourth quarter last year, Mellon wrote off $106 million of receivables in the Cornerstone portfolio, prompting the bank to address the losses, said Mr. Dever, the Mellon spokesman.
Mellon also put on the block one quarter of its $3 billion card portfolio.
The bank said it is negotiating to sell its $750 million American Automobile Association card portfolio to PNC Bank Corp., its Pittsburgh rival.
This year, PNC won the association's endorsement to market financial services to its 34 million members. Mellon also bid on the contract.
Since PNC's coup, a number of banks with AAA accounts are "trying to figure out what to do with them, whether they should sell them or compete against PNC," said Michael Auriemma, president of Auriemma Consulting Group, Westbury, N.Y.
Mellon's decision to sell the portfolio, said Mr. Dever, is a result of PNC's exclusive contract with the auto club.
Mr. Duggins' 18-year credit card career includes stints at Bank of New York, where he was a senior risk officer, and American Express Co., where he held several posts.
