How Will BofA-MBNA Deal Impact the Card Industry

By Ivan Schneider, Bank Systems & Technology

The announced merger between Bank of America (Charlotte, N.C., $1.21 trillion in assets) and MBNA (Wilmington, Del., $61.4 billion in assets) will leave no question as to which financial institution is the biggest player in the U.S. credit card market. But how long will it stay on top?

“Citigroup has gone from being number one to number three in the last 12 months,” observes John Gould, director of TowerGroup’s (Needham, Mass.) bank card research service. “With the Bank One-Chase Merger, they’re number two. Now they’re number three. Can you imagine that Sandy Weill’s company is going to stay number three?”

Indeed, a Citi-AmEx merger is one possibility, as American Express “would clearly be a crown jewel for a large banking franchise lacking in the cards arena, such as Citigroup or HSBC,” writes David Hendler, senior analyst with research firm CreditSights (New York). “The days of AmEx and Capital One are basically numbered since their product capabilities are more valuable to a financial banking conglomerate than to grow it organically,” continues the report.

Another unanswered question is the status of the MBNA-AmEx relationship, through which MBNA issues AmEx-branded cards. Given that AmEx is currently suing Bank of America and other Visa and MasterCard member banks for billions of dollars, the conflicts are both obvious and unresolved.

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