Some sellside banking analysts are raising eyebrows at Bank One Corp.'s (Aa3/A) acquisition last week of Wachovia Corp.'s $8 billion portfolio of consumer credit card receivables. They argue that the threat of an extended economic slump could lead to widespread customer default. Also cited as a risk is the bank's already substantial credit card exposure, through credit-card issuer First USA, which has been struggling and has yet to show clear signs of a turnaround, they add. A Bank One spokesman declined comment.
"We question why Bank One is so aggressive at this stage, particularly coming on top of the unclear situation at First USA, which has, at best, stabilized," saysCarl de Jounge, v.p. of Global Credit Research at Deutsche Banc Alex. Brown. Though Moody's Investors Service has said it will not downgrade Bank One as a result of the deal, De Jounge thinks that could change long term, and he lowered his recommendation last week from buy to hold.
Ethan Heisler, director of corporate bond research atSalomon Smith Barney, was less critical, but isn't a bull on the deal. "[James] Dimon [Bank One chairman and chief executive] is a charismatic guy, who has the goodwill of the agencies. It's for them [Bank One] to screw it up." Heisler says that though the move should improve the bank's overall credit card portfolio, he thinks First Union Corporation is a "better turnaround story," in large part because it is in the process of selling its credit card business.