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Financial institutions considering issuing American Express cards in defiance of San Francisco-based Visa or MasterCard of Purchase, N.Y., had better move those plans from the back burner off the stove, at least for the short term. The first U.S. issuer to challenge it, Advanta Corp. of Spring House, Pa., has backed down from its Rewards Accelerator, a program which linked Advanta to American Express' (AmEx) Membership Rewards.
Advanta had a number of good reasons for backing down, few of which had anything to do with the merit of the program, say analysts. Alex "Pete" W. Hart, CEO at Advanta, and Dennis Alter, chairman of the board, re-evaluated their priorities and determined that addressing Advanta's declining value on Wall Street was more important than doing battle with a giant, even over a very good cause. Other Priorities "They were in a position of strength when they engaged with AmEx. They are not in a position of great strength any more," says James Accomando, president of Fairfield, Conn.-based Accomando Consulting. "Their portfolio is under-performing. Losses are up, and delinquencies and chargeoffs are up, enough so as to severely affect the price of their stock, which has plummeted," says Accomando. "They have other priorities."
Advanta has to focus on its core business and return it to stability. It issued a statement last month detailing its plans to "return the company to its historical levels of financial performance by increasing revenue and stemming... card losses." The company will report a loss in the first quarter but anticipates showing a profit for 1997. At $1.50 a share, it will be substantially less than last year, when each share earned $3.89, according to information provided by Advanta.
"I frankly don't think they would have changed their minds {about the relationship with AmEx} had they not encountered the losses," says...