Wachovia Continues Growth, Stockpiles Receivables


Inching toward the $10 billion mark, Wachovia Bank Card Services' receivables portfolio topped $8.3 billion, following the purchase of $1.9 billion in credit card receivables from Partners First Holdings, said Robert S. McCoy, Wachovia's chief financial officer.

Though Wachovia has no current plans to sell the debt, Partner's portfolio includes $500 million in unsecuritized loans.

"We may securitize it in 2000 or we may not," McCoy said. "We look at the whole portfolio, blend everything together, and look and see if we need to do it."

Additionally, as part of a five-year deal with Partners, Wachovia will act as the credit-card originator for Harris Bank, a subsidiary of Partners, which will further increase Wachovia's card portfolio.

"We don't really have an estimate right now of what we expect to get from that," McCoy said. "This is an investment we'll have to make. We certainly believe we can increase the penetration [into Harris's consumer base] with the value proposition we add as the Wachovia card issuer, and secondly, by our experience in doing this."

Though the credit cards will still carry the Harris name, Wachovia will be the agent bank, marketing the cards and "doing all the back reporting."

"We'll own the card and pay them," McCoy explained.

In addition, Wachovia will reserve the right to securitize the assets the company originates through Harris Bank, McCoy said.

"That, of course, is an issue that we'll look at based on concentration levels on the balance sheet and funding needs," he said. "Right now, we have no plans to [securitize the loans], but we would certainly leave our options open to do that in the future, if we were successful in adding a significant amount of cards."

Though Wachovia added between 300,000 and 400,000 credit cards into its portfolio last year, these additions were to counteract natural portfolio deterioration, so that the net increase in portfolio size was minimal.

Despite the sudden increase in receivables pending the Partners deal, Wachovia isn't looking toward rapid growth.

"The systems we have, and the infrastructures we've built, can take approximately a $10 billion portfolio," McCoy said. "We've said to the Street that we have expected to move towards the $10 billion number sometime over then next few years."

Before Partners, Wachovia's last major addition to its assets was the approximate $300 million purchase of the Wells Fargo card portfolio in 1998. The portfolio was backed by "off foot-print" loans, or loans outside of Fargo's regional states.

Wachovia last accessed the asset-backed market in September, with a $460 million credit card deal. The deal, managed by Credit Suisse First Boston, was structured in two parts: a $430 A-class and a $30 million B-class. The September transaction was Wachovia's third since entering the public market in 1995.