Mark Tran in New York
Banc One, one of the United States’s top regional banks, this week vaulted into the top tier of US credit card companies by announcing the acquisition of First USA for $7,5-billion.
The deal will make Banc One the third biggest credit card issuer behind Citicorp and MBNA with $33-billion in credit card loans.
The acquisition reflects the trend towards consolidation in the credit card business. Last year, Citicorp held discussions to acquire American Express in a deal that would have been worth as much as $40- billion although talks have broken off for now.
Analysts expect other credit card companies such as Capital Financial One to be acquisition targets. “To be in the top 10 in the credit card business, you either have to grow internally, which is very difficult, or acquire someone,” said Tom Facciola, an analyst with Salomon Brothers.
First USA grew quickly in the 1990s by concentrating exclusively on credit cards. The Dallas company built up its customer base by using sophisticated computer techniques to pick out the most credit- worthy customers and then offering them gold cards with low rates. It has
16-million customers who owe a total of $22,4-billion on their Mastercard and Visa accounts.
But fast growth brings its perils. There is concern that rising deliquencies, especially by newer customers, could hurt the credit card business. Consumer debt is approaching an all-time high with a growing number of card holders falling behind on payments. And while unemployment is low, more than one million households filed for personal bankruptcy last year, a record for a single year.
Banc One was a pioneer in the credit card business, but lost ground to specialised companies like First USA.