Magazine article American Banker

Barnett Strikes a Deal for Household to Manage Its Credit Card Portfolio

Magazine article American Banker

Barnett Strikes a Deal for Household to Manage Its Credit Card Portfolio

Article excerpt

Barnett Banks Inc. moved to dispose of its credit card problems Thursday by announcing a "strategic alliance" with Household Credit Services Inc. to manage most of the bank's $1.7 billion portfolio.

Under the two-part agreement, Jacksonville-based Barnett will sell $780 million of "noncore" card receivables directly to the credit card subsidiary of Chicago-based Household International.

The two companies will then jointly manage and build Barnett's remaining $1 billion portfolio, consisting of "core" customer relationships in Florida and Georgia.

"It's definitely a positive move because you're matching the marketing expertise of Barnett with the sophistication of a larger credit card services company," said analyst R. Harold Schroeder, with Keefe, Bruyette & Woods Inc.

Barnett, which has $40 billion of assets, had revealed in July that it planned to sell its card portfolio or make it a joint venture in the wake of rising credit losses.

Barnett's card chargeoff ratio rose to 6.4% in the second quarter, up from 6.1% in the first, compared to an industry norm of 5%.

Most analysts who follow Barnett had assumed that Barnett would attempt to jettison the problems in its portfolio while protecting its core credit card relationships. That view was borne out by the agreement announced Thursday.

"It was very clear talking to Barnett that they weren't interested in giving up control of the credit card business totally," said Moshe Orenbuch, with Sanford C. Bernstein & Co. …

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