Magazine article American Banker

Monoline Card Issuers Hurt Least in Down Market

Magazine article American Banker

Monoline Card Issuers Hurt Least in Down Market

Article excerpt

Stocks of the monoline credit card companies have held up better than those of most other financial services companies-though the monolines have been losing market share.

They have surely been hurt, but the monolines, so-called because cards are their overwhelming specialty, have been spared the worst punishment meted out to the financial sector by investors.

By Friday's close, shares of the top three companies in this category were off an average of 31.6% from their highs. MBNA Corp. was off 32.1%, Capital One Financial Corp. 20.4%, and Providian Financial Corp. 10.7%.

Those performances can hardly be termed good-except when compared with the Standard & Poor's bank index, which has plummeted 36.8% from its high of 788.95 on July 14.

Analysts concede that some key trends in the card industry are deteriorating, but they contend these companies should be able to blunt the chilling effects of a tougher business climate by going into new lines of business and enforcing stricter credit standards.

"In this environment everyone is nervous, but the decline in these stocks is much more a function of the broader market than of weakening fundamentals," contended credit card analyst Jennifer S. Scutti of Prudential Securities Inc.

Even in a harsh market, stocks of these companies are likely to fare better than most others in the financial sector, according to Michael L. Granger at Fox-Pitt Kelton Inc.

Nevertheless, growth of credit card receivables has slowed to just 5% this year, from an average of 15% in the early 1990s, according to analysts. …

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