Magazine article American Banker

S&P and Moody's Split on Credit Implications of MBNA's New Products

Magazine article American Banker

S&P and Moody's Split on Credit Implications of MBNA's New Products

Article excerpt

Standard & Poor's Ratings Group and Moody's Investors Services recently revealed different reactions to a perceived shift in MBNA Corp.'s mix of credit card products.

Moody's, which has a higher opinion of MBNA than S&P does, changed its outlook Monday to negative from stable. S&P raised its outlook to stable from negative, reflecting confidence that its ratings are appropriate to MBNA's current customer base.

Moody's change reflects concerns "about how their franchise is developing," said David Fanger, Moody's credit card analyst. MBNA has pioneered the use of affinity cards, tied to customers' membership in organizations such as alumni groups and trade organizations, among other groups.

"Our view is that unlike some of their more traditional affinity programs, which were endorsed by a particular organization, in these newer types of programs the affinity of the cardholder is weaker," said Mr. Fanger. He cited the state series, in which an image of the cardholders' state is shown on the card.

Alison B. Emmerich, S&P's credit card analyst, acknowledged that MBNA has changed the mix of its products away from programs that hinge on a strong affinity on the part of the consumer. But she argued there is little cause for immediate concern.

MBNA, for its part, disagrees with Moody's assessment of its client base. "We've been marketing to groups with a common interest for 15 years whether or not they are a part of an affinity group with a formal membership list," said Dave Spartan, senior vice president of investor relations at MBNA.

Mr. Spartan said that the characteristics of the credit card company's new customers were consistent with that of the overall portfolio.

Bank bond analyst Allerton G. Smith of Donaldson Lufkin & Jenrette said that MBNA knows how to price risk. He anticipates that the bank will do so as well with its new cards as it has with others. …

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