MBNA chief sees company's future in the cards While other institutions back off, Mastercard giant forges ahead


WILMINGTON, Del. - Charles Cawley has long seen gold where others see lead, mining the overlooked business opportunity to the hilt and making it pay off handsomely. Take, appropriately enough, the gold credit card, which despite its hue left many bankers cold.

In 1983, when he was head of the small credit card unit of the Maryland National Bank, Cawley pounced on the new Gold Mastercard, becoming the top issuer of a product that other banks had chosen to ignore. He repeated the feat last year as head of the now-independent unit, renamed MBNA Corp. and based here, when he introduced the first major bank-issued platinum card.

But Cawley's greatest insight was to see the gold in people's sense of identity. MBNA, which went out on its own in 1991, has long been the leader in "affinity" credit cards, which identify the customer's profession, college, hobby or charity. Who would have thought that a credit card affiliated with Ducks Unlimited, -- the hunting group, would draw a crowd? Yet a flock of 165,000 people have taken that card, earning MBNA quite a little nest egg. With 12,000 separate card products, MBNA has grown to be the nation's second-largest card company, after Citicorp, with 25 million accounts and $46 billion in receivables.

Digging deeper and deeper

The question facing MBNA now, however, is whether what it is mining is really fool's gold. With bad credit card loans and personal bankruptcies surging, most other card issuers have pulled back the last two years. MBNA, by contrast, is digging deeper and deeper.

Every month this year, MBNA has mailed an average of 30 million ''TC credit card solicitations, offered 6 million people cards by phone and signed up 700,000 new accounts. The result is that it is increasing its loan balances by $1 billion a month, a record for the industry, and a full 30 percent of the nation's total increase in unsecured debt.

Why lend so much money at such a precarious time? Because, Cawley said, MBNA is different from other card companies. Indeed it is, given the way it has married a fixation on details to a mandate to keep customers happy. When it comes to credit cards, such a compulsive approach helps reduce the risks, the company maintains.

Not only does the affinity strategy bring in a better group of customers, but every application is evaluated by one of 400 loan officers, instead of the computer systems used by other lenders. If something is ambiguous - and it is almost one quarter of the time - the officers do something a computer cannot: They pick up the phone and talk to the applicant. This process is more expensive, but MBNA's losses, while rising, are far less than that of any other big card company.

Cawley argues that all of the losses in the industry are from a relative handful of people who run into financial difficulty. With its careful screening, he says, MBNA can keep growing rapidly, lending to the 98 percent of the people who can and will pay their bills.

Betting on honesty

"The whole bet of this company is on the honesty of human beings," Cawley said recently. That other card companies have backed away from the market creates a perfect opportunity for MBNA, he said.

"We love it when other people are distracted from growing," Cawley said. "We are never distracted."

Although bond-rating agencies worry that MBNA's portfolio has been growing faster than its capital, stock analysts mostly approve of the risks it is taking. "This is not a young company with half its portfolio less than a year old," said Mark Alpert, an analyst with BT Alex. Brown. "This is one of the oldest and most experienced companies in the industry, and its credit quality is second to none."

Under Cawley, MBNA has developed an introverted culture that pampers its clients. But don't talk to him about culture. "We don't have a culture, we have an attitude," he said. "Our attitude is every customer gets satisfied."

To get the point across, the 57-year-old Cawley has had motivational slogans painted on the walls of all of MBNA's buildings. A typical conference room wall may read "Complacency is devastating" or "Success is never final." Over every doorway is the motto, "Think of yourself as a customer."

Paychecks are inscribed "brought to you by the customer." The checks have more than words to back up the idea. MBNA has declared a 15-point test of appropriate service - are phones answered within two rings, are credit line increases approved in under 30 minutes and so on. Each day the company beats these standards, money is put in a bonus pool for all employees. The bonus can average nearly $1,000 a person each year.

The company is determined to control every aspect of its business. The 4,000 people who call to solicit new accounts and the 1,250 who try to collect payments from delinquent accounts are all MBNA employees, rather than the outside vendors used by many other credit card companies.

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