First Chicago To Buy a Bank For $247 Million --- Acquiring Beneficial Unit Would Allow Expansion Of Credit Card Business
First Chicago Corp. moved to expand its profitable credit card operations with an agreement to buy a Delaware bank, which has $1 billion in credit card loans, from Beneficial Corp. for $247 million.</br></br>The purchase of Beneficial National Bank USA of Wilmington would expand First Chicago's big and profitable Visa and MasterCard business by nearly a third -- to about $4.4 billion in loans on about four million cards. At the same time, the move would give the Chicago-based parent company of First National Bank of Chicago a banking charter in a state that has been hospitable to credit card issuers.</br></br>Some Illinois state politicians have sought to force First Chicago and other charge card issuers to lower their interest rates -- First Chicago charges 19.8% on Visa and MasterCard balances -- as consumer deposit rates have fallen to about 5.5%. Banks' across-the-board cost of funds aren't much higher than that. Though it doesn't appear that any legislation to curb such rates is imminent, the Delaware bank would give First Chicago a safe haven in any event, as Delaware doesn't regulate interest rates or annual fees on credit cards.</br></br>Beneficial, a Wilmington-based financial services and insurance concern, is in the midst of a restructuring effort because of heavy losses from its reinsurance business. Beneficial put itself up for sale in August, but recently decided instead to sell its major units, with the exception of its core consumer loan business.</br></br>The sale of the Delaware bank had been expected and didn't excite Wall Street. Beneficial closed at $55.50 a share, up 62.5 cents, in New York Stock Exchange composite trading Wednesday.