Looks Like the Bankruptcy Bill Backfired on MBNA!

[Stephanie]

Hah!

-----------------------

http://www.thestreet.com/_tscrss/stocks/banking/10219019.html

MBNA Hit by Customer Paydowns
By Matthew Goldstein
Senior Writer
4/21/2005 2:28 PM EDT

Shares of credit card giant MBNA (KRB:NYSE - commentary - research) were getting squeezed in Thursday trading, after the company announced a 94% decline in first-quarter profits and offered a dismal earnings outlook for the rest of the year.

The Delaware-based card company's stock plunged $3.70, or 16%, to $19.41.

***

MBNA said its earnings were "impacted by unexpectedly high payment volumes'' from its U.S. customers. The move by customers to pay down their credit card bills, particularly on high-interest-rate cards, reduced the dollar value of managed loans in MBNA's portfolios.

Card companies don't make as much money when customers either pay their bills on time or pay down their outstanding credit card debt.

The faster paydowns forced MBNA to revalue its interest-only strips, a type of security it uses as a hedge for its securitization business. The downward revaluation resulted in a $206 million loss in securitization activity, which is why MBNA reported an 8% decline in "other operating income'' compared to a year ago. In the quarter, other operating income totaled $1.78 billion.

-----------------------