Great American Intends to Sell Bank Card Division
In a move that places 104 jobs in jeopardy, Great American First Savings Bank said Monday it plans to sell its bank credit card operation before the end of this year. The savings and loan said it cannot guarantee it will find new jobs for the operation’s workers elsewhere in the organization in the event the buyer fails to hire them.
Although Great American insists the 194,000-member bank card operation is profitable, it said those profits are threatened by a possible recession later this year and by intensifying competition. Great American’s bank card business currently has about $210 million in outstanding receivables.
The thrift decided to sell the operation now rather than wait for the economy to sour, when other banks and S&Ls; with bank card businesses might get the same idea, spokesman Ken Ulrich said. Great American services both Visa and MasterCard accounts.
“Long range, we would rather redeploy the management skills and resources in the area of real estate lending,” Ulrich said. “The (bank card) portfolio is in good condition. If things should deteriorate, it would be more difficult to sell it.”
The S&L; approached investment banker Goldman Sachs late last year and asked it to “very discreetly” approach potential buyers, Ulrich said. No deadline or target date has been set for a sale.
Spencer Nilson, author of Nilson Report, a Santa Monica-based credit card industry publication, said Great American is one of “20 or 30” banks and S&Ls; to have decided in recent months to put their bank card operations on the block.
Many of those decisions have been prompted by gloomy economic forecasts, Nilson said. A recession could make credit card operations money losers because non-payment of accounts inevitably goes up, he said.
In addition, big banks have increasingly taken a bigger market share of the card business by benefiting from economies of scale, making it harder for smaller operations to compete, Nilson said.
“There have been quite a few sales and there will be quite a few more coming up,” he said. “In a downturn, there may be hundreds of banks and S&Ls; trying to sell. You get a better price now than if you wait.”
Although there are 1,500 banks and S&Ls; in the bank credit card business, the top 10 institutions control about 33% of bank card receivables, Nilson said. The 40 largest banks and thrifts control 53% of the bank card business, he said.
Citicorp has the largest bank card operation in the nation with $10 billion in receivables and 16 million cards issued, Nilson said.
Great American began to issue bank cards in 1979 for accounts administered by Security Pacific. In 1981, it purchased its portfolio from Security Pacific.
Although Ulrich said Great American will encourage its credit card employees to apply for other jobs at the S&L; if the new owner does not take them, he said the thrift “cannot promise we’ll find jobs for all people.”
Great American is the second major San Diego thrift in the past two years to decide to unload its bank card business. Home Federal Savings sold its $335-million operation in 1985, taking a loss reserve of $35 million in its third quarter that year. Home Fed’s cardholders then totaled in excess of 100,000. Home Fed sold the operation at an $8-million gain later that year.
