CalFed to Sell Credit Card Portfolio to Salinas Bank

California Federal Bank said Thursday that it is selling its $125-million credit card portfolio to Household Bank, a Salinas-based subsidiary of Household International of Prospect Heights, Ill.

The Los Angeles thrift’s credit card customers are not likely to notice much difference, although their accounts will be transferred to Household. CalFed Inc., the thrift’s parent firm, will continue to issue MasterCard and Visa credit cards in its own name to customers under an agreement with Household.

The move by the Los Angeles thrift is another sign that the market for credit card operations, which are highly profitable and relatively easy to service, is heating up.

Earlier this week, First Interstate Bancorp said it may sell First Interstate Bancard, a Simi Valley subsidiary that services First Interstate Bank credit cards and issues cards in its own name outside California. Last September, Great American Bank in San Diego sold its $210-million credit card portfolio, also to Household, for an undisclosed amount.

September Closing

The price that Household will pay California Federal was not disclosed but is believed to be $20 million to $25 million, based on a comparison of prices paid in the past three years for other credit card portfolios.

CalFed said it expects to post an after-tax gain of $10 million to $15 million from the sale of the 160,000 accounts. The final price will be determined in September, when the sale is expected to close, CalFed said.

Under Pressure

CalFed executives had previously indicated in meetings with investors that the operation would probably be sold as part of its strategy to concentrate more on its basic lending businesses. CalFed added that it is selling the operation in part because it has been competing with a number of firms with much larger portfolios.

The sale should also help CalFed in its efforts to strengthen its capital position, although a CalFed spokesman said that was not the primary reason for the sale.

CalFed and many other thrifts are expected to be under pressure during the next few years to increase their capital levels in the wake of new federal savings and loan rules that toughen capital requirements and ultimately will not allow thrifts to count intangible assets, called goodwill, as capital.