Card profits: how far will they slide? Bank cards are still profitable, but bankruptcy filings and competition are changing the rules of the game.

The most sought-after bankers in coming years may be those with a formula for keeping bank card profitability from slipping below a 15% return on equity (ROE) by the end of the decade. By some estimates, bank card profitability fell by more than 10% in 1991.

Propping up bank card profits in the days ahead won't be easy, despite the fact that bank-issued credit cards, combined with a burgeoning demand for debit cards, currently are one of banks' most valuable assets.

To put profit picture in perspective, the banking industry in general earned an average ROE of 8% over the past five years. Bank card products, by comparison, earned an average ROE of 25% to 30% during that time, attracting the competition so familiar to issuers today. (AT&T's Universal card products became profitable for the telecommunications giant in June, 27 months after they were launched.)

A survey called Vision 2000, conducted by Andersen Consulting last year, revealed that bank executives anticipate their card products will earn 14.4% on equity in the year 2000--half the level they're accustomed to. The survey also indicated that 23% of issuing banks that have more than $5 billion in assets anticipate exiting the bank card business by the end of the decade. Some banks will sell the business line to raise much needed capital (as several have already done), and others will sell while the business is making money rather than waiting until margins are even thinner.

Bankruptcy blues. Chief among the threats to bank card profitability--more so even than nonbank competition--is the tide of personal bankruptcy filings, which shows no sign of ebbing without legislative reform. (In late July,…