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MBNA CORPORATION EXPECTS CONTINUED GROWTH AND PROFITABILITY

      MBNA CORPORATION EXPECTS CONTINUED GROWTH AND PROFITABILITY
    NEWARK, Del., Nov. 18 /PRNewswire/ --  MBNA Corporation (NYSE: KRB) today issued the following:
    In response to an article published today by a financial weekly, MBNA Corporation is issuing the following release to set the record straight.  It is particularly important to separate fact from distortion at a time when proposed legislation affecting the credit card industry is under discussion.
    We recognize that the article was highly complimentary about MBNA's many strengths including:
    -- "MBNA commands a loyal Customer base, a hefty capital cushion, and a reputation for service."
    -- "MBNA boasts one of the lowest loss rates in the industry and among the strongest earnings."
    -- "MBNA has the strongest capitalization ratio of the top 100 banks in the country."
      -- "MBNA's blue-chip Customers have an average income of more than $56,000 a year, and the bank has an average balance of $2,000 on its cards, considerably above the industry average."
    -- "More than 40 percent of MBNA's seven million accounts are premium, or gold, cards."
    -- "The portfolio is up some $800 million this year to $8.2 billion."
    It is remarkable that in the face of this positive information, the writer could reach such distorted conclusions.
    AFFINITY MARKETING
    It is asserted in this article that the affinity marketing concept is "tapped out" and maintaining relationships with endorsing organizations is costly and likely to become more so.
    MBNA is currently endorsed by more than 2,200 organizations representing over 90 million members.  These organizations include such diverse groups as medical associations, educational associations, bar associations, engineering groups, financial institutions, fraternal organizations, and many, many more.
    Although penetration of group memberships ranges from as low as 2 percent to as high as 75 percent, the average penetration among our groups is 5.5 percent, leaving enormous opportunities for growth.
    MORE
    In addition, during 1991, over 400 new groups have signed exclusive endorsements. During the years ahead, growth will come from increased penetration of existing groups, from new members joining groups, and from new endorsements.  We plan to add over 7 million new Customers over the next five years.
    Because of MBNA's strong Customer service commitment, relationships with endorsing groups have never been better.  The writer actually contacted a number of our groups and heard this first hand, a fact that he elected not to mention.  The most important thing to organizations that endorse us is that their members receive the best product available at a fair price, backed by superior service.  That is what they want, and that is what they get from MBNA -- unfailingly.  Nothing will change this.
    CREDIT LOSSES
    It has been stated in the article that "MBNA's credit losses could push higher."
    Most people would agree that 1991 has not been a very good year for the average consumer -- maybe one of the worst in the last 25 years. During 1991, MBNA's credit losses will be approximately 3 percent -- right where we expected, and lower than the industry average in the best of times.  Presently, industry charge off levels are running at 5 percent and the average for large issuers is closer to 6 percent.  Our delinquency levels are lower than they were a year ago and our losses in 1992 will not exceed the current level.  The article's implication that MBNA is having a problem with credit losses is wrong.  This should be obvious to the writer based on his own facts.
    Our superior credit loss performance will continue year after year after year because of the way we do business.  We focus on getting the right Customers, and then we work very hard to keep them.  The typical new Customer added to our portfolio during 1991 has been employed for 13 years, has a family income of $44,000, owns a home, and has a 13-year history of paying bills promptly.  If anyone can find a better Customer than that, we congratulate them.
    During 1991, only 43 of every 100 people who applied for a credit card with us received it.  Through affinity marketing we get the best applicants, and then we give credit cards only to the best of the best. That will not change.
    FUNDING
    MBNA has been criticized in the article because it "lacks a retail branch network, relying on brokered CD's" and "could face difficulties raising the money."  Most banking companies today are working to reduce their costs of delivering deposit products.  It is well known that when a bank merger occurs, the first thing that happens is branches are closed.  In two short years, MBNA has attracted 150,000 Customers with deposit balances exceeding $2.7 billion -- without a single branch. This is not a weakness, it is a strength.  During 1991, our deposit portfolio has grown by 47 percent and it will continue to grow.  There has been no need to grow brokered CD's.
    Securitization is a valuable, effective funding source.  The marketplace for securitizations is currently estimated at over $50 billion, with MBNA's asset backed securities in very strong demand and generally trading with the tightest spreads to Treasuries.  While proposed legislation jeopardizes the market in general, almost all of MBNA's securitizations would be unaffected by a rate cap.  As a matter of fact, it is likely ours would be in far greater demand.
    If rates were capped at 14 percent, virtually all of MBNA's securitizations would have sufficient excess servicing income to prevent early amortization.  MBNA is the only major issuer that can make this statement.  This safety margin is already in place, without the need for any modifications.  Further, in the unlikely event that all securitizations came back on MBNA's balance sheet, our capital ratios would still be in excess of required regulatory minimums.
    COMPETITION
    The article states that "the emergence of big new well-heeled competitors obviously doesn't come under the heading of good news" for MBNA.
    In ten years, we have grown from the 37th ranked bank credit card company to the 3rd largest bank credit card company.  These ten years were marked by intense competition from banks and non-banks alike.  No competitor has been able to impede our growth.
    Since AT&T began offering its no-annual-fee credit card in 1990 we have lost just one-tenth of one percent of our accounts to them and of those, 86 percent had never paid MBNA an interest charge.  Likewise, year to date we have lost two 100ths of 1 percent of our Customers to Discover's no-annual-fee card.
    These facts further demonstrate the unassailable advantage of our unique marketing methods and our superior delivery of Customer service.
    RATING AGENCIES
    The article asserts that Standard & Poor's (S&P) rating of MBNA reflects problems inherent in monoline businesses.
    We are criticized for being a monoline business, as if that is a negative.  We take that criticism as a compliment.  We concentrate on credit cards and intend to continue.  Credit cards are a key financial resource for the vast majority of Americans.  This business has been strong and vibrant since its inception.  We have no intention of going into construction lending, foreign lending, or HLT lending.  We think the business we are in is just fine.
    If diversity is important, we have it -- we have an $8 billion loan portfolio spread over 7 million people with average balances of $2,000 -- people living in every part of the United States, with no geographic concentration, no Customer concentration, and no industry concentration. For example, over 38 percent of all physicians, 15 percent of all educators, 22 percent of all attorneys, and 80 percent of all medical students carry MBNA credit cards.  Our business is based on the honesty and decency of individuals:  on the moral strength of the American people and our proven ability to analyze
and evaluate their capacity to repay.   That is diversity.  That is strength.  If anyone wants to invest in the businesses we choose not to be in, they should not own our stock.
    On the matter of ratings, this writer chose to mention one of our ratings, but ignored many others.  Thomson BankWatch, the premier rating agency for financial institutions in the United States, rates MBNA as a B, which puts us in the top 30 percent of all banks in the country. Fitch Investors Service rates MBNA as A-plus, and the Duff & Phelps rating is an A.  Moody's Investors Service rates the bank as an A3, and Veribanc has rated MBNA as a green three-star bank, their highest rating category.  And these ratings are without the benefit of seeing our first year's superior results as a new public company.
    Our S&P rating was received in March 1991, and this rating was given prior to three quarters of excellent financial performance, and has not been updated.  Contrary to implication, no recent concerns have been raised by S&P.  In fact, S&P has made a number of positive remarks about MBNA as recently as July, to wit:  "strong capital levels," "good profitability," "above average asset quality," and "The company has posted high levels of profitability over the last few years due to good credit performance and strong market position."
    SUMMARY
    Generally, we would not specifically respond to distortions and inaccurate criticisms.  Rather, we would let our results speak for themselves.  The magnitude of the distortions and inaccuracies in this article (regardless whether they were accidental or purposeful), coming at a time of turmoil for the credit card and banking business, obligate us to respond.  The article is wrong in its conclusions about credit losses, affinity marketing, funding, competition, and rating agencies. In fairness, the writer did spell MBNA correctly.
    /delval/
    -0-                          11/18/91
    /CONTACT:  David W. Spartin, senior vp-investor relations of MBNA, 800-362-6255, or 302-456-8588/
    (KRB) CO:  MBNA Corporation ST:  Delaware IN:  FIN SU: KA -- PH039 -- 4567 11/18/91 15:14 EST
COPYRIGHT 1991 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Date:Nov 18, 1991
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