Wachovia Cuts MBNA Ties As MBNA Shareholders OK BofA Deal

Wachovia Corp. has announced it is re-entering the credit card business and will end a relationship with MBNA Corp. under which MBNA has issued cards for Wachovia since 2002. The news comes on the same day that MBNA shareholders voted overwhelmingly to approve a $35 billion acquisition of the monoline credit card issuer by Bank of America Corp., a deal first announced in June (Digital Transactions News, June 30). The deal, which is still subject to regulatory approval, is expected to close early in January. In a statement released today, Wachovia says without giving further detail that its decision to terminate its joint marketing agreement with MBNA stems from an “in-depth” study the bank conducted on its credit card relationship with MBNA after the announcement of the monoline's merger with BofA. The bank will begin issuing cards in January to existing bank customers, though MBNA will retain the current Wachovia-branded portfolio and will re-issue cards to those cardholders. The banks expect the relationship to be concluded by October, though Wachovia says MBNA must pay it a $100 million termination fee upon the closing of the BofA acquisition in January to cover the cost of Wachovia's re-entry into the credit card business. Wachovia performs banking services for 13 million households and business customers, and has issued more than 7 million debit cards. The size of the current Wachovia portfolio at MBNA was not made available. “We have carefully evaluated our options and decided that, as one of the nation's leading banks, we will issue credit cards directly,” said Ben Jenkins, president of Wachovia's general bank division, in a statement. “This also offers us a great opportunity to gain synergies with our debit and ATM card businesses.” MBNA acquired Wachovia's credit card portfolio in April 2002, seven months after Wachovia acquired First Union Corp., with which MBNA had signed an issuing agreement in August 2000.