Magazine article American Banker

Finance Firms Led in Card, Home Equity Securitization Last Year

Magazine article American Banker

Finance Firms Led in Card, Home Equity Securitization Last Year

Article excerpt

Specialty finance companies dominated securitization of credit card receivables and home equity lines last year.

As was the case with other asset types, well-capitalized banks were willing to keep high-yielding loans on the books.

The market for credit-card-backed receivables saw explosive growth in 1994, reflecting a continued boom in the use of credit cards by consumers.

But top issuers were MBNA Corp., First USA Inc., and Sears, Roebuck and Co. The top commercial bank was Citicorp, which ranked fourth.

"This has been a good year for consumers, and that is reflected in credit card trends," said Scot Kaufman, chief financial officer of MBNA in Newark, Del.

Issuance totaled roughly $33 billion, up from $20 billion in 1993, according to Ed Bancole of Moody's Investors Service Inc. He predicted that growth would continue, barring an unexpected economic downturn that could slow credit card borrowing and increase delinquencies.

MBNA, a specialist in affinity card marketing, brought 10 issues to market to raise $5.08 billion, representing a 16.4% market share, according to Securities Data Co.

Mr. Kaufman said MBNA uses securitization for about half of its funding needs.

One-third of its funds are raised from deposits, and the rest from medium-term notes, subordinated debt, and purchased funds.

First USA Bank, another credit card specialist, ranked second, with 13% of market share and $4.04 billion of proceeds.

Sears, which operates a huge store-card program, ranked third, with $3.25 billion of proceeds.

Among commercial banks, Citicorp, which has the largest portfolio of MasterCard and Visa credit card accounts, raised only $2. …

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