Date: To: From:  Re:

2/28/02 Dr. David Chappell Jesse Kernc The Wall Street Journal Project regarding MBNA

My Wall Street Journal Research was conducted on MBNA .   I found 15 articles on MBNA and its rivals.  MBNA is an independent credit card lender and an issuer of affinity credit cards, marketed primarily to members of associations and customers of financial institutions. In addition to its credit card lending, the Company also makes other consumer loans and offers insurance and deposit products. MBNA also offers home equity loans, aircraft loans and corporate loan products. 
 

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Table of contents

$=not worth reading...$$$$$=worth every minute of your time.
 

MBNA

Article 1  $$$$$

More Ads Target Small Firms, But How Good Is Their Aim?

Small businesses are a great potential market, but it is not always easy selling to to them market.  Advertising and marketing efforts aimed at smaller businesses have skyrocketed in recent years and in the past four years, financial advertising directed towards small businesses has more than tripled.  While this trend continues, MBNA strays from the pack and sells its credit cards through industry and professional associations rather directly to small businesses.  MBNA boasts that almost 70% of U.S. physicians and about 50% of U.S. Lawyers carry an MBNA credit card that they signed up for in response to mail solicitation.  MBNA strategy is to use logos or insignias with the permission of an association, that way, the mail has the appearance that it is directly from the association.  That way, MBNA is not fighting the mailbox filled with other credit card applications to get its envelope open. 

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In the finance world Bank One Corporation saw its score on Wall Street drop a whopping 5.7%.  This huge drop is probably reflecting Bank One's wide-ranging restructuring of its credit-cards and retail-banking business during the past two and a half years.  A company spokesperson, Thomas Kelly,  said that the company was doing a poor job of customer service since 1999, but that Bank One's internal numbers are going up, showing that its points are going to go up as well.   Spokesperson Kelly said that they are still working on the company's customer service but that they know it is better than it used to be and they are sure it will only get better from here. Customer service is a huge part of any business and for you to be successful you must excel in costomer service. 

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About a month ago, e-mails were sent out to Citibank bankers.  These bankers did not give the memos much thought.  Citigroup sent e-mails to their workers to not discard any document relating to Enron Corporation.  The memo stated that they might be needed down the line if lawsuits emerge related to Enron.  After employees from the firm Arther Anderson LLP destroyed thousands of e-mails and paper documents related to Enron Corporation,  the Citigroup bankers are happy they kept the documents so they do not have to deal with producing documents they do not have.   Citigroup stated that they rarely get rid of things like that and they are really glad they did not this time because it saved them alot of trouble.  It is their policy not to discard documents.   Citigroup now told their employees to archive Enron-related e-mails to prevent them from being deleted. 

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As the Federal Reserve is cutting the interest rate,  some credit-card companies are raising their rates. Citibank , the nation's biggest card issuer, is issuing a card carrying a rate 13% over the prime rate.  Providian Financial is raising the rates paid by bad creditors by as much as six percent.  The higher rates are to cover the growing number of deadbeats.  With the economy slowing, many cardholders are having trouble paying their bills.  Credit-card charge-offs have climbed 18% since last year, and are continuing to rise.  It is not just people with credit problems who are paying more.  Many consumers with great credit are also getting charged with higher rates.  Some credit-card issuers, instead of raising rates on existing cards, are introducing new cards with higher rates.  Citigroup  has test marketed a new credit-card with a rate of prime plus 12.99 % (instead of a high of 10.40). 

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Eventhough Michael Bloomberg, New York City's new mayor, may owe some thanks to his brokers because he financed his own campaign last year, he still answers the call of the giants of wall street.  Mayor Bloomberg showed up promply to a function held on Tuesday, January 14 to honor Citigroup .  Citigroup announced it was going to donate $100 million dollars to the Weil Medical College of Cornell University.  Mr Weil already gave $100 million dollars to the school in the past and the school was named after him for that.  Mr.  Bloomberg accepted the invitation to the function despite his hectic schedule, even though the invitation was late.  Mr. Bloomberg added that the invitation was not really an invitation at all it was a order that he could not turn down.  American Express also donated a hefy gift of $50 million dollars to the Weil Medical College of Cornell University. 

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A few years back Citigroup and another company were considered powerful because they backed Enron Corp and had the name Enron behind them.  But now, Citigroup is viewed in a whole new light after the Enron Scnandal.  A few weeks ago, a large Italian member of Enron's banking system sued Citigroup because the Italian member said Citigroup lured other lenders into financiang arangements even after they knew of Enron's  potential demise.  Citigroup responded by saying that the charge is ridiculous and that the Italian member of Enron's banking system has no proof that could proove wrong doing on Citigroup's part.  Further development in this case is likely to bring more attention to Citigroup along with Wall Street.  It will bring attention to Wall Street for its role in Enron's financial transactions, in which some transactions helped  Enron hide debt and inflate interest wrongly. 

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Citigroup agreed to pay $1.6 million to 26 states and will start a consumer-protection program to settle complaints about the telemarketing practices of their business partners.Citibank agreed to several reforms.  One reform including prohibiting customer charges unless there is direct authorization of the account holder, Illinois Attorney General Jim Ryan said. Citibank will review all telemarketing practices, ensure that telemarketing firms comply with consumer protection laws, and require "clear and conspicuous" disclosure of the identity of the telemarketing company if the call makes reference to Citibank   The agreement settles a two-year, multistate investigation led by Mr. Ryan and attorneys general from New York, California and Vermont.  The Illinois attorney general's office said the state will receive $170,000 to cover costs of the investigation. It also noted that Citibank admitted no wrongdoing and did not apologize for their actions.

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Edward Yardeni is planning on switching firms in the near future.  Mr. Yardeni is taking control as the cheif investment strategist at Prudential Securities.  Mr. Edward Yardeni held the same position at his former job.  Before his switch to Prudential,  Mr. Yardeni worked at Deutsche Bank AG's Deutsche Banc Alex. Brown.  Mr. Yardeni, who was with the Deutsche Bank since 1991, takes over Prudential Financial within the year..  Prudential Financial is a smaller unit of the much larger Prudential whole.  Mr. Yardeni assumes the position on April  22 when  he will begin working for Prudential Financial.  When a call was made to Mr. Yardeni's office, the recorder said that he is on vacation untill April 22 and that if you need to talk to him to call back on the 22. 

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Robert Stovall was fired from the Prudential in what was called a cost cutting move.  Mr.  Stovall has been a Wall Street fixture for the last 50 years and has been a senior market commentator and senior vice president for the past two years.  Mr.  Stovall said he was let go purely for budget reasons as the unit of Prudential Financial Inc. cuts back staff.  His official departure from Prudential will ocur at the end of the month and the announcement of his departure came two days after Prudential announced the hiring of Edward Yardeni as the cheif investment strategest form Deutsche Bank AG's Deutsche Banc Alex.  Brown,  where he held the same position.  A Prudential spokesman said that Stoval's firing had nothing to do with bringing in Yardeni.  Prudential said that Robert Stovall was a true professional and a true Wall Street veteran, and that they were happy to have had him as a member of the firm. 

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The Prudential Securities analyst, Wayne Hood, surprised everybody when he predicted Kmart would be filing for bankruptcy way before they actually did.  Mr. Hood's prediction on Kmart came after months of watching the company's basics deteriorate. Cash flow had been a trouble spot for the retailer since the second quarter and it wasn't getting better. In addition sales were down particularly around holiday time, and inventories were rising. It also became clear to him that Kmart couldn't hold its projected level of spending in 2002 and 2003.  To analysts schooled in Wall Street's traditional ways, risking a relationship by turning critical on a company is a sin and should never be done.   In Mr. Hood's perdicament, some people snubbed him after his Kmart call .  They canceling meetings that haven't been rescheduled. "People like to hear the sell rating as long as they don't own the stock," Mr. Hood said.  Taking hardnosed approach isn't exactly a new move for Prudential , a unit of Prudential Financial Inc. A year ago, the  firm began taking a tougher stance with the companies it covers. It has been out to forge new ground not to make friends.

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Investors contributed $13.73 billion to money funds bringing total assets to $2.183 trillion according to Money Fund Report newsletter reports last week.  Year-to-date funds have seen inflows of $80 billion with taxable money flows contributing for the bulk of the inflows at $71 billion.  Analysts attribute new growth in the market because corporations have new, bigger budgets and individuals get bonuses that they deposit into money funds where as before they did  not deposit it into money funds.  New 401 (k) retirement funding has  also contributed to the new growth in the market. American Express Funds saw an increase in money go into bond and money-market funds last year.  But their stock funds were mixed.  In November and December, American Express started seeing money moving form money-market funds into stock funds.  American Express even started seeing some money move to a few select growth funds. 

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American Express funds unit is switching management of a pair of its worst-performing mutual funds.  Shareholders of American Express's AXP Discovery and AXP Progressive finds are being asked to approve the hiring of outside managers.  American Express is doing this because they hope to give existing shareholders the chance to get new, and hopefully better investing management for their funds.  Progressive's returns were among teh worst 20% of Morningstar Inc's midcap blend category for the past ten years.  Over the past year, the funds lost an wopping 9.4%.  The unsatisfactory performance of both funds has led many investers to leave the American Express funds.  Over a whole, American Express offers a total of 53 mutual funds with $74 billion in assets and as a marketing ploy, last year they decided to launch six new funds run by outside managers, but those moves did not involve replacing andy managers. 

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American Express is still suffering from post September 11 decline in traveling and the immediate layoffs they were forced to make after the terrorist attacks.  American Express is already down to $297 from $677 from last year.  The New York travel and financial services warned Wall Street that earnings would decline after September 11.  Investors punished American Express's stocks.  Common trading on the Dow Jones were down 70 cents.  2001, was the worst year for American Express.  Net income for the company fell to $1.31 from $2.07 the year before.  Their 2001 results reflected the overall decline in the economy's decline in consumer spending, business travel and investment activity, after the terrorist attacks of September 11 attacks.  While American Express sees signs of improvement, they are till taking a cautious view and expect the economy to remain weak throughout 2002. 

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American Express Co. is teaming up with International Business Machines Corp. for a technology-services agreement valued at more than $4 billion over seven years.  IBM will provide American Express with access to its computing resources over the next four years. The agreement is expected to save American Express "hundreds of millions"of dollars in information-technology costs over the length of the four years.   Twenty American Express technical staffers will be let go, and 2,000 will be able to transfer to IBM with comparable pay and benefits. That will enable American Express to tap IBM's services as they need them, letting them  adapt more easily to business conditions.  American Express said it will keep its core technology, including information technology strategy, strategic technology relationships, the development and maintenance of applications and databases and the management of its businesses' technology portfolios.  American Express hopes to revolutionize their technology within the four years to help their company.

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American Express has agreed to pay $31 million to more than 4000 women who say they were denied equal pay and promotions because of their sex and age.  The settlement, which still needs to be approved by the judge, could also require American Express to hire a diversity officer, and by 2005, increase its hiring of women to 32% of all new financial advisors.  "About 25% of the units financial advisors are currently women," a spokesperson said.  The women who filed the claim say that the blatant sexism hampered their carreer.  American Express denies the allegations but decided to settle rather than to go into expensive litigation.  This settlement hits American Express hard because they are still recovering from their huge losses from investing in risky securities.

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