People’s Bank, the Connecticut thrift whose position as the 16th-largest U.S. bank card issuer is somewhat anomalous in the age of mega-issuers, said it sold its United Kingdom credit card portfolio to Citibank because the operation had outgrown its ability to manage it.

The deal, which closed Friday morning, transferred People’s Bank’s U.K. card business — $436 million of receivables and 250 employees — to the Citibank International PLC subsidiary of Citigroup Inc. Citi paid $526 million for the assets, and People’s Bank, of Bridgeport, says it will take away $70 million pretax from the deal, which will be recognized in the second quarter.

The U.K. portfolio represented 15% of People’s Bank’s credit card business, which had $3.7 billion in total receivables before the sale. The U.K. assets now constitute about 40% of Citigroup’s U.K. cards business.

John A. Klein, president and chief executive officer of People’s Bank, said the U.K. cards business, which opened in 1996, had grown so much that People’s would have had to invest heavily to continue supporting it.

“By last fall, we had really reached a strategic point in the business,” Mr. Klein said in a telephone interview. “We knew we had built something special and that it would require considerable investment, including in management, to take it to the next level.”

People’s Bank was the smallest of several U.S. card issuers — including MBNA Corp. and Capital One Financial Corp. — that set up shop in the United Kingdom in the mid-1990s to expand their businesses and capitalize on the weaknesses of U.K. banks’ one-size-fits-all card offerings.

Mr. Klein said that in 1996, People’s saw opportunity in British card companies’ failure to compete in interest rates and other incentives, most notably with Barclays Bank, the issuer of Britain’s most popular card, the Barclaycard.

“We observed that this was a market dominated by High Street banks that were fairly locked into their rates,” said Mr. Klein, who joined the North American board of MasterCard International last year. “It gave us a real opportunity to market our cards, and then it was simply a matter of building our reputation.”

The 23% premium on the portfolio sale will divert fresh funds to People’s struggling domestic base. The thrift announced the sale Friday alongside a disheartening estimate of its first-quarter earnings, and analysts said that in light of a weakening economy, the transaction was a smart one.

People’s Bank said Friday that it expected first-quarter earnings to be in the range of 20 cents to 22 cents a share, against 45 cents that had been forecast by First Call/Thomson Financial. Some analysts had been making even higher predictions than First Call.

Mr. Klein blamed securities losses in the bank’s equities portfolio and increased credit card chargeoffs for the bank’s diminished performance. According to the company’s annual report, its credit card division reported 2000 net income of $10.1 million, versus $23.9 million in 1999.

Mr. Klein said the windfall from the U.K. sale will add fresh reserves to its core U.S. segment. “The premium obviously buttresses our capital portion and gives us some flexibility,” he said. “If we had completed this transaction in the first quarter, we would have had a fantastic run.”

In a news release, Robert B. Willumstad, chairman and chief executive officer of Citigroup’s global consumer business, called the deal a step toward “broadening our presence in the important U.K. marketplace.” Citi will try to build up the People’s portfolio as well as its other U.K. card operations, which include the receivables it inherited through last year’s purchase of Associates First Capital Corp. Additionally, Citibank has recently introduced in the United Kingdom a cobranded card with American Airlines that is similar to the successful AAdvantage card in the United States.

Don J. Kauth, an analyst at Keefe, Bruyette & Woods Inc. in New York, said that, while People’s Bank has long cultivated a niche in the credit cards market, a business growing in Britain probably needed to be lopped off.

“You do have to wonder when a Connecticut-based regional bank is expanding its operations into England,” Mr. Kauth said. “It just makes more sense to focus on Connecticut. I think they are expanding, but nationally.”

Heather L. Dilbeck, who covers People’s Bank for Ryan, Beck & Co. in Livingston, N.J., agreed with Mr. Kauth’s assessment. “The span of control from Bridgeport to London is kind of long,” she said. “I think John Klein is putting his mark on the shop by skinnying down and concentrating on Bridgeport.”

Mr. Klein affirmed People’s commitment to its U.S. card business, despite the heavy consolidation going down everywhere else in the industry. Within its midsize issuer category, another significant player, Wachovia Corp., announced in February that it might sell its cards portfolio.

“Don’t draw inferences from this sale in the U.K.,” Mr. Klein said. “We don’t think it follows that unless you’re a behemoth in size, you can’t compete in this business. At the same time, it’s tough.”

Mr. Klein said Citigroup was not the only issuer that had expressed interest in People’s U.K. business, but the attention from the world’s largest card issuer was flattering.

“Certainly they’re a global player, and that makes a difference,” he said. “When you consider that a small regional bank from Connecticut built this U.K. operation from scratch, starting with no brand identity, it is quite a validation for Citibank to add that to their global book of business.”

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