MBNA earnings rise 27%

Fourth quarter exceeds estimates and previous record

January 05, 1999|By BLOOMBERG NEWS

WILMINGTON, Del. -- MBNA Corp., the largest publicly traded U.S. credit-card company, said yesterday that its fourth-quarter net income rose 27 percent to a record, beating analysts' expectations, as it added new customers through marketing agreements with colleges, charities and other groups.

The company had net income of $238.3 million, or 30 cents a share, up from $188.3 million, or 23 cents, a year ago. Analysts surveyed by First Call Corp. expected MBNA to earn 29 cents.

In each quarter since it went public eight years ago, MBNA has shown earnings increases averaging 25 percent over the year-earlier period.

Credit-card loans increased 21 percent to $59.6 billion from the year-earlier period. The company created 475 marketing agreements in 1998 and added 11.3 million customers.

Delinquent loans made up 4.62 percent of total managed loans as of Dec. 31, down from 4.69 percent in the third quarter. That's up from 4.07 percent in the fourth quarter of 1997. Loan losses for the year were 4.31 percent, lower than the industry average of 6.5 percent. "They had very solid performance," said Moshe Orenbuch, an analyst at Sanford C. Bernstein. About three-quarters of MBNA's loan growth was from its own customers rather than through acquisitions, Orenbuch said. "You'll probably only see one other player that will see that kind of internal growth."

Separately, the company said it sold 50 million new shares of common stock to Goldman, Sachs & Co. for $24 a share, raising $1.2 billion. Goldman, in turn, will sell the shares to investors.

MBNA said it will use the proceeds to pay for its acquisition of PNC Bank Corp.'s credit-card business, announced last month, and for "general corporate purposes."

The purchase of PNC Bank's credit-card business, which has $2.9 billion in receivables in 3.3 million accounts, will allow MBNA to offer its cards to 36 million American Automobile Association members, who had been served by PNC. In the fourth quarter, MBNA bought credit-card portfolios from Union Planters Corp., Household International Inc. and European American Bank.

MBNA's net interest margin -- the difference between what it pays to borrow money and what it charges customers -- was 7.47 percent in the fourth quarter. That's flat from last year, said Stephen Biggar, an analyst at Standard & Poor's Equity Group. "People look to them for consistency," Biggar said, though he added that its size might make it difficult for MBNA to grow as quickly as its competitors.

Capital One Financial Corp., the No. 2 U.S. publicly traded card company, said its earnings will increase 30 percent in 1999. Providian Financial Corp., the third-largest independent card company, forecast that 1998 and 1999 earnings will grow 50 percent.

MBNA said its directors approved a 16.7 percent increase in its quarterly dividend to 7 cents a share.

MBNA said it formed an agreement under which American International Group Inc. will underwrite auto insurance, home- owners insurance and personal umbrella insurance for MBNA's customers.

MBNA has been without an underwriter for its insurance programs since July when it canceled a 2-year-old contract with TIG Holdings Inc.

In 1998, MBNA earned $776.3 million, or 97 cents a share, up from $622.5 million, or 76 cents, a year earlier. MBNA shares fell 81.25 cents, to $24, yesterday after hitting a 52-week high last week.

Pub Date: 1/05/99

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