MBNA Looks Like A Catch

Down But Not Out
When shares of MBNA (KRB ), the top independent credit-card lender, swooned to 18 on Apr. 22, down from 25 the week before, growth investor Carl Birkelbach of Birkelbach Management jumped in. MBNA had posted so-so first-quarter results -- and cut its earnings forecast for 2005. Also, the tough new bankruptcy act has raised fears of a rush of filings before the law takes effect on Oct. 17. But Birkelbach added to his stake. The stock is now at 21. Interest in MBNA has jumped, he notes, since Apr. 23, when Bank of America (BAC ) CEO Ken Lewis said on CNBC that he wanted to expand the credit-card business and was open to acquisitions. "Credit cards are very profitable," says Birkelbach, "and fears about bankruptcies are overblown. So the stock is a bargain." He sees it at 30 in a year. David Hochstim of Bear Stearns (BSC ) says MBNA, a client, is an "attractive property" -- one that any big bank might like to acquire. Fierce rivals, says Hochstim, who owns shares, have spurred MBNA to diversify into home mort-gages and medical practitioners' financing -- and to broaden its overseas credit-card business. Hochstim, who rates the stock "outperform," sees earnings of $2 a share in 2005 and $2.44 in 2006. Evan Momios of Standard & Poor's (MHP ), who has a "five-star strong-buy"rating, says the stock doesn't yet reflect MBNA's "better-than-peer-average credit quality." MBNA didn't return calls. Bank of America declined comment.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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