First National Expands Card Portfolio, Plans New Cobranded Deals

Cobranded cards, which fell out of favor somewhat when the consumer losses soared during the recession, are poised for a rebound, if First National Bank of Omaha’s plans are any indication.

The Omaha-based card issuer next year will launch three “significant” cobranded credit card programs, Steve Eulie, president of First National’s First Bankcard credit card division, tells PaymentsSource on the heels of the company adding nearly $300 million in card receivables through an acquisition from Bank of America Corp.

First National last year became one of three major issuers to offer credit cards supported by all four of the major network brands, and on Dec. 21 it announced the purchase of 10 institutions’ credit card portfolios from BofA, which served as the banks’ agent issuer.

The deal includes BofA’s $100 million former Chrysler Financial card receivables; the credit card portfolio of New York Community Bank, which operates 1,000 branches; and card portfolios associated with Apple Bank, Chemical Bank, First Bank, First Farmers and Merchants, and Old National Bank. The deals amount to $285 million in total receivables, according to a press release.

BofA earlier this year announced a plan to divest assets, including credit card portfolios from many of its bankcard agent relationships (see story).  U.S. Bancorp’s Elan division separately announced on Dec. 21 it has acquired $700 million in credit card assets from BofA  (see story).

First National began issuing Chrysler cobranded cards in April through a new relationship with Chrysler Group LLC (see story). However, BofA continued to own the receivables from the former operation until this deal was completed, Eulie says.

Besides the acquisitions from BofA and its new Chrysler cobranding deal, First National in April launched a cobranded Visa card with The Grand Ole Opry, Eulie noted.

First National’s moves make good on its promise last year to continue to expand in the bankcard market and to go after new cobranded card deals (see story).

“During the last couple of years, because of economic pressure and other factors, it looked like private-label retail and general-purpose cobranded cards were falling out of favor,” Eulie says. “But now things are turning around as credit quality improves and certain retailers see opportunities in partnerships.”

For each bankcard deal First National absorbed from BofA, it negotiated separately with the bank, Eulie says. Terms of each deal vary based on the size and type of the portfolio.

First National will own the receivables and handle risk-management and servicing. The partner bank will market the cards and get a cut of profits, Eulie says.

The bankcard portfolios First National acquired from BofA consist of a mix of Visa- and MasterCard-branded cards, Eulie says. First National next plans to determine whether to keep or change the brands on the cards, based on opportunities.

“We have the option to work with any of the four card brands, and each has certain aspects that benefit a certain type of customer and a certain pattern of spending,” Eulie says. “We’ll analyze that and determine whether there’s a need to switch card brands on any of the portfolios we’ve acquired.”

First National is eager to expand by taking over more bankcard portfolios, but not every deal is a match, Eulie says.

“We carefully evaluated the banks’ portfolios we are taking over to make sure it was the right match and that we can work together with the partner bank,” Eulie says.

Certain banks, such as Regions Financial Corp., this year decided to get out of the agent bank game and buy back their own receivables (see story).

Eulie does not see that becoming a major trend.

“For larger banks like Regions, it can make sense to take your own receivables back. But if you have less than about $1 billion in receivables, it’s tough to make a profit lacking large scale,” he says.

What do you think about this? Send us your feedback. Click Here.