MBNA is no longer around. Before it was bought by Bank of America, MBNA was the largest independent credit card lender in the world, marketing through relationships with more than 5,000 professional organizations, universities, sports leagues, retailers, and financial institutions. MBNA also offered deposit and insurance products, consumer loans, and business credit cards. The plum in the deal for Bank of America was MBNA's extensive marketing operations, which offered products to prospective customers based on their income, credit rating, age, and locale.
MBNA generally targeted middle- to upper-middle-income customers who pay their bills promptly and carry a sizeable credit card balance. Every customer was approved by a person -- which was more expensive than automated applications but paid off in fewer defaults.
Affinity card marketing in the UK had contributed substantially to MBNA's bottom-line growth in the new millennium. The company ceaselessly recruited clients for its cards aimed at professional, educational, recreational, and charitable organizations, including NASCAR, the Marine Corps Association, and the National Hockey League, with the organizations receiving a percentage of total credit card sales.
Subsidiary MBNA Insurance Services offered property and casualty, life and health, and disability insurance. MBNA Consumer Services provided home equity loans; to bolster its residential lending operations, the company bought mortgage processor Nexstar Financial in 2005. The year before, MBNA acquired Sky Financial's professional practice financing business (now MBNA Practice Solutions), which provided secured loans to doctors, dentists, and other medical specialists.
MBNA took advantage of industry-wide consolidation, fueling its growth by purchasing the credit card portfolios of such companies as PNC Financial Services, SunTrust Banks, SouthTrust, First Union, Comerica, AmSouth Bancorporation, and UK-based Abbey National, and then issuing cards on their behalf.
MBNA was started in Newark, Delaware, in 1982 by Charles Cawley as the credit card subsidiary of Baltimore-based MNC Financial. To expand its customer base, Cawley persuaded the Alumni Association of Georgetown University (his alma mater) to endorse MBNA's credit card in exchange for a percentage of the revenues generated by the cards.
When the alumni list generated a higher-than-average response from its higher-than-average-income customers, Cawley realized the potential of such arrangements. He soon signed up the American Dental Association. By 1985 MBNA had more than $1 billion in outstanding loans. In 1986 loans zoomed to $2 billion.
Even as other card issuers began issuing affinity cards, MBNA was improving its marketing to retain its early lead. By focusing on high-quality professional groups through trade shows, telemarketing, and direct mail, the company increased its market share of low-risk card users, and by 1990 MBNA was the largest issuer of gold MasterCards.
But MBNA's parent company, MNC Financial, was not doing as well. As real estate loan losses mounted in the late 1980s, the bank approached insolvency. Alfred Lerner, a major MNC shareholder, was brought in to run the troubled bank in 1990. He tried to sell MBNA to raise cash, but potential buyers like Discover Card (then owned by Sears) found the asking price too high. Instead, Lerner took MBNA public in 1991. (Its stock symbol, "KRB," honors the late Kenneth R. Bowman, who had overseen MBNA's service quality.) The offering brought $955 million for MNC, which was later acquired by NationsBank (now Bank of America). Lerner bought about 10% of the newly independent MBNA and became its CEO. Cawley became president.
Business boomed even through the 1990-1991 recession. The company set up MBNA International in 1993 to offer credit cards in the UK; this business contributed significantly to the company's bottom line throughout the late 1990s. Affinity groups in the UK included the Rolls-Royce Enthusiasts' Club and soccer fans.
The company began offering home equity and big-ticket consumer loans (through MBNA Consumer Services) in 1996, along with property/casualty (mostly auto) insurance. In 1998 MBNA started offering its credit cards in Canada.
Over the next year the industry's loan losses rose, but MBNA's high-quality portfolio helped the company keep its own default level low. In 1999, the bank (rock and) rolled out Elvis Presley credit cards. That year American International Group (AIG) began underwriting MBNA's automobile insurance products, along with its homeowners and personal umbrella insurance, replacing previous underwriter TIG Holdings. MBNA also bought the $1.5 billion credit card business of SunTrust Banks, including the portfolio of Crestar, which SunTrust had recently purchased.
In 2000 the company bought the credit card portfolios of Comerica and First Union. MBNA bolstered its presence in the UK with the purchase of Abbey National's credit card operations in 2001. In 2002 it added Wachovia's portfolio and expanded into Spain.
Chairman, CEO, and company icon Al Lerner died in October 2002. His son, Randy, was appointed chairman and founder Charley Cawley was named CEO. Cawley retired in December 2003 under board scrutiny and was replaced by Bruce Hammonds.
MBNA began issuing its own American Express branded credit cards in the US, Canada, Spain, and the UK in 2004.