The credit card business looked a lot like banking as a whole last year: Profits were ample, though not as rich as in previous years, and acquisition activity went through the roof.

In the acquisitions, taking the form of portfolio sales, a record $32.29 billion of receivables changed hands, according to an annual compilation by R.K. Hammer Investment Bankers of Thousand Oaks, Calif.

That was up from $10.8 billion in 1997 and $7.12 billion in 1996.

Meanwhile, Hammer estimated the 1998 pretax return on card outstandings at 2.5%, hefty by banking return-on-assets standards but down for the fourth straight year. From 3.9% in 1994, the figure fell to 3.6%, 3.3%, 2.6%, and now 2.5%.

Robert K. Hammer, chief executive officer of the banking firm, said issuers are taking in more fees but spending more on marketing and customer rebates and rewards.

Total income as a percentage of card outstandings-the top-line ratio from which the pretax return is derived-fell in 1998 to 17.3% from 17.4% in 1997 and 17.9% in 1996, an indication of how competition is keeping interest rates down.

Operating expenses and chargeoffs were each up 10 basis points, to 4.4% and 4.7%, respectively, while cost of funds fell to 5.7% from 5.9%.

Chargeoffs and delinquencies have stabilized in recent quarters, enhancing the stability of the business and contributing to the portfolio sale activity. Michael R. Dean, a director of the credit card group at the ratings agency Fitch IBCA, said there were "more buyers because it was a less volatile environment."

Mr. Hammer said the dramatic rise in deals was not just a mirror of the banking industry, but a reflection of technology refinements that let portfolio managers identify trouble spots.

"We're now able to slice the portfolio any number of ways to understand the risk and reward and profit of any small segment," Mr. Hammer said. Credit card executives can "make buy, sell, or hold decisions about those various segments" instead of about the "aggregate of accounts."

For example, First Union Corp. last year sold two batches of accounts- each worth $1.1 billion-to Providian Financial Corp. Most of the cardholders lived in areas not served by First Union's retail branches.

A few years ago, "you would never have thought of First Union as being on the radar screen of sellers," said Mr. Hammer, who specializes in brokering portfolio sales.

Excluding the changes brought about by bank mergers, Mr. Hammer counted 26 major credit card deals in 1998. That does not include 55 transactions under $15 million, which he deems too small to be meaningfully tabulated.

In 1997 there were 22 major deals.

Though the average premium paid for card portfolios did not change much- it was 13.1% in 1998, 13.2% in 1997-Mr. Hammer said there were wide fluctuations.

"Some large portfolios of rather dubious quality pulled the average down," he said. But there were "enough good portfolios going for 17% to 20% to lift (the average) back up."

Prices failed to drop precipitously despite the "huge volume" of accounts for sale, Mr. Hammer added.

He said 20 million consumers had their credit cards sold to different issuers last year.

Also noteworthy was the fact that 14 companies bought sizable amounts of assets. "Normally, you'd be talking about two or three or maybe four (buyers) that did 90% of the volume," Mr. Hammer said. Last year "it was very evenly distributed among a wide number."

Jerry D. Craft of Inficorp, an Atlanta firm that manages credit card portfolios for banks, said the pace of deals has been fueled by the availability of securitization.

"Any acquirer has to make their hurdle rates, return on assets and return on equity," Mr. Craft said. "The fact that they can securitize allows them to leverage the equity and grow the portfolio with a different financial formula than if they had them on their own balance sheets."

Mark C. Alpert, an analyst at BT Alex. Brown who follows the credit card industry, said the 1998 dealings showed that companies are "either focusing on core parts of their receivables business or deciding to outsource the business."

Several second- or lower-tier card issuers decided to sell parts of their portfolios, as First Union did, or to form agent-bank relationships as an outsourcing alternative.

The concentration of credit card assets among a handful of large issuers has grown more pronounced, Mr. Alpert said. BT Alex. Brown's data indicate that the top 15 companies controlled 64% of receivables as of Sept. 30, up from 57% a year earlier.

Each of the three largest issuers-Citigroup, Bank One Corp., and MBNA Corp.-has about $60 billion of card loans.

"A year or two ago, I would have said that you have to have $20 billion to be a major player," Mr. Alpert said. "Now it looks more like $30 billion or $40 billion."

A number of companies "are kind of at awkward sizes," he said, and many of these "will probably have to decide whether they want to stay in the business or get out."

Mr. Hammer said card assets represent 4.4% of U.S. banking assets, yet produce 8.6% of profits.

Platinum and cobranded cards continue to perform better than others. A platinum card account generated an average of $370 in revenue last year, versus $337 for a gold card account and $305 for a standard one.

An average cobranded account brought in $340, versus $305 for others.

Revenues on Visa and MasterCard cards averaged $317, while private-label accounts brought in $250.

On the commercial side, the purchasing card account average was $157, versus $155 for a revolving small-business account and $141 for a nonrevolving corporate travel and entertainment card.

Technology has helped issuers "design and launch products that more closely track with the needs of the buying public," Mr. Hammer said. Card issuers can ward off losses by tailoring interest rates and credit lines to individual customers.

Mr. Hammer said his findings rebut the Department of Justice's allegations in an antitrust suit against MasterCard and Visa that the card associations stifle competition.

The data paint a picture of "an enormously competitive industry," Mr. Hammer said. "My view is that the banks are largely in this business because of the competitive value provided by Visa and MasterCard."

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