NEW BANKRUPTCY LAW BACKFIRING?

[rommel]

This from www.clarkhoward.com ...thought ya might enjoy the read..

ankruptcy law scaring people into paying down debt

The credit card industry was patting itself on the back when the new bankruptcy law it has been pushing for finally got passed recently. But the banks and credit card companies may soon regret what they wished for. The new bankruptcy law has gotten so much publicity that people are scared and they’re paying down their credit card bills at an unprecedented rate. People are realizing that there is no second chance with this new law. If you borrow a lot of money, you’re going to have to pay it back now. And people don’t like paying money back, so they’re being more careful with credit. MBNA, for example, has already had a decline in profits of 94 percent. Capital One has also seen its outstanding balances decline. As a result, these companies are going to flood your mailbox with solicitations for cards. It’s a move of desperation, and you don’t want to get involved. So, keep paying down your debts and let the credit cards reap what they sow.

[LadynRed]

94 % loss in profits ?? ? I'd like to see where he got that number from. Although I'd be VERY happy to see MBNA's profits take a huge nose-dive - and stay there, 94% is a mighty steep drop just in a couple of weeks.

Reap what they sow.. damn straight.. and I hope people KEEP dropping them like hot potatoes !

[admin]

I'd like to know where this stat came from also, it seems pretty out there.

[bingo]

All you gals have to do is ask!

I think Clark makes an assumption that's not really vaild. Sounds like they are losing a lot of high interest accounts to BT's and re-fi's.

US CREDIT - Cards hold bad news for MBNA

NEW YORK, April 21 (Reuters) - A 94-percent decline in earnings is never a good thing.

MBNA Corp. , the world's largest independent credit card lender, on Thursday reported that its first-quarter profit plummeted, in part because consumers paid off higher-cost credit card debt sooner than expected.

It is a tough time to be a credit card lender as competition from banks and other credit card companies is fierce. U.S. consumers are increasingly paying down their credit card bills using home equity lines of credit and other mortgage loans.

MBNA has historically avoided competing for customers on the basis of rates alone, preferring instead to offer extra perks to card holders, and to snag card holders through "affinity groups" like their universities or professional organizations.

But that strategy may have to change, analysts said, and figuring out how to get new customers without sacrificing profits may be difficult.

"They need to get more competitive on pricing, but that will take a few quarters, because you still want to focus on the highest-quality borrowers," said Traci Hallett, a high grade credit analyst at BNP Paribas in New York.

Meanwhile, MBNA could turn in sub-par earnings for a few more quarters, which could push its spreads wider, Hallett said.

Those concerns helped lift the cost of protecting the company's debt against default dramatically. The fact that the company's bonds were not hit quite as hard suggests that speculative accounts may have been responsible for much of the movement, traders said.

But others were not so sure that it makes sense to short MBNA's credit. The company's assets are still high quality, and MBNA is diversifying its asset base, which should help its credit quality stay reasonably strong, a trader said.

The company could also be a potential takeover target, which would likely pull its spreads tighter, a trader said.

The price of protecting MBNA Corp.'s debt against default for five years rose about 10 basis points to 62 basis points on Thursday, or $62,000 a year for every $10 million of principal protected.

Spreads on MBNA's 6.125 percent notes due 2013 <55263ECH6=> widened 8 basis points to 107 basis points.

((Reporting by Dan Wilchins; editing by Gary Crosse; Reuters Messaging: [email protected]; +1-646-223-6320))

[amortgageman]

Just because a corporation is allowed a restructuring charge of $750+ million dollars to go to the bottom line on earnings doesn't necessarily mean profits decreased that much.

MBNA Reports Earnings Per Common Share of $.02, Including the Impact of the Previously Announced Restructuring Plan

THURSDAY, APRIL 21, 2005 7:18 AM

- PR Newswire

KRB

19.67 -0.08 News

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WILMINGTON, Del., April 21, 2005 /PRNewswire-FirstCall via COMTEX/ -- MBNA Corporation announced today that net income for the first quarter of 2005 was $31.7 million or $.02 per common share compared with $519.7 million or $.40 per common share for the first quarter of 2004. Net income in the first quarter of 2005 includes a restructuring charge of $767.6 million pre-tax. Without the restructuring charge, net income was $514.1 million or $.40 per common share.

In addition to the restructuring charge, the Corporation's results were further impacted by unexpectedly high payment volumes from U.S. credit card customers. The higher payments reduced managed loans in the quarter more than in prior years. Additionally, the payment volumes were particularly higher on accounts with higher interest rates, which adversely impacted the Corporation's yield on managed loans.

As a result of these recent trends, in the revaluation of its interest- only strip receivable, the Corporation projected lower excess spreads and higher payments. This reduced the interest-only strip receivable and resulted in a net loss from securitization activity of $206.6 million. The net loss from securitization activity is included in other operating income and caused the Corporation's first quarter 2005 other operating income to be lower than its first quarter 2004 other operating income.

The Corporation is implementing programs to offset the higher payment rates in the U.S. Card business. "It is a difficult environment right now. However, we've made progress on recent product introductions, diversification strategies, and improvements in credit quality and operating efficiency," said Bruce L. Hammonds, MBNA's Chief Executive Officer.

Based on the first quarter results and trends, management believes that MBNA's 2005 earnings per share will be significantly below its 10% growth objective.

Loan receivables at March 31, 2005 were $31.8 billion, an increase of $1.8 billion over the first quarter of 2004. Total managed loans at March 31, 2005 were $116.6 billion, a decrease of $1.0 billion compared to the first quarter of 2004. Total volume in the quarter rose to $49.3 billion, an increase of 5% over the first quarter of 2004. Total volume includes sales volume of $33.3 billion, which increased by 10% over the first quarter of 2004, and cash advance volume of $16.0 billion, which decreased by 5% from the first quarter of 2004.

Losses on loan receivables and managed loans for the first quarter of 2005 were 3.98% and 4.48%, respectively. Delinquency on loan receivables and managed loans was 2.93% and 4.17%, respectively, at March 31, 2005. Based on improving asset quality trends, the provision for possible credit losses was $77.9 million lower in the first quarter of 2005 than in the first quarter of 2004.

The Corporation's other operating expense in the first quarter of 2005 was $2.1 billion, including the restructuring charge. The Corporation's focus on improved operating efficiency has generated better results than anticipated, and other operating expense, excluding the restructuring charge in the first quarter of 2005, was lower than in the first quarter of 2004 by 6%. In addition, during the first quarter the Corporation repurchased approximately $250 million of common stock pursuant to its $2 billion share repurchase program announced in January 2005.

[Uncle Rico]

Laymans terms please!

Please tell me that what all that means is that MBNA is taking a good whacking because of their greed driven pressure to restructure the BK system.

[Guest rogcoley]

Allow me to be rude and jump in without warning. Can I protest my credit report by disputing charges and sending this into the big three? My wife thinks I can do this, but it sounds too good to be true.