Area firm in credit card rollout deal First Annapolis Consulting Inc. joins with 3 big banks

Headquarters in Linthicum

Company will battle MBNA and First USA for market share

Consumer finance

September 05, 1997|By Bill Atkinson | Bill Atkinson,SUN STAFF

A Linthicum-based financial consulting firm has teamed up with three large banks to start a new company that will issue credit cards.

First Annapolis Consulting Inc. will be part of an alliance made up of BankBoston Corp., Bank of Montreal and Harris Bank, the Bank of Montreal's Chicago-based subsidiary.

The company, which has yet to be named, will be based in Linthicum and have offices in Delaware and Boston, said John R. Soderlund, who is a managing director with First Annapolis and will leave to become president and chief executive of the credit card company. The new company is expected to be open for business by Nov. 30.

"We are creating a formidable new credit card company," Soderlund said yesterday. The company will "capitalize on the opportunities and restructuring taking place in the credit card industry."

The companies have joined forces because large credit card issuers such as Wilmington-based MBNA Corp. and Dallas-based First USA Inc. are taking away market share at the expense of regional banks.

An alliance will enable them to compete regionally and nationally with less expenditure.

"The market is truly saturated," said Robert B. McKinley, president of RAM Research Group, a Frederick-based credit card research company. "On the issuer side, the party is pretty much over."

But McKinley said there is "opportunity to acquire portfolios on the cheap" because the industry is shaking out.

The new company will have to amass about $10 billion in credit card loans before it can run as efficiently as competitors. It will have more than 1 million customers and nearly $2 billion in credit card loans when it opens for business.

Soderlund said he has already contacted up to 10 banks about joining the alliance. He expects one or two banks to join the group next year. He said 20 to 30 jobs may be created in Baltimore and Boston.

The new company enables banks to issue Visa and MasterCard with their logo, while not having to staff and finance their own credit card operations.

It has contracted with Atlanta-based First Data Resources for data processing, customer service support and collection. The new company will market the credit cards and find customers through its own research and analysis.

Bank of Montreal, the 10th largest banking company in North America with $147 billion in assets, will kick in $115 million in cash to capitalize the new company. It will have a 69 percent ownership stake in the new company.

Harris Bank will contribute its consumer credit card portfolio, which has 500,000 customers and $750 million in loans.

BankBoston, which has $66.1 billion in assets and is the nation's 15th largest banking company, will exchange its national credit card portfolio of 550,000 customers and about $1.2 billion in loans for cash. It will receive a 19 percent ownership stake in the company.

First Annapolis will own 12 percent of the new company. It is contributing First Annapolis Marketing Information Services Inc., a credit card portfolio management company that it owned.

First Annapolis is a 7-year-old financial consulting and merger and acquisition firm with about 80 employees.

Pub Date: 9/05/97

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