UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2005

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _______ to ______

Commission file number 1-10683

MBNA Corporation

(Exact name of registrant as specified in its charter)

Maryland	52-1713008
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Wilmington, Delaware	19884-0131
(Address of principal executive offices)	(Zip Code)

(800) 362-6255

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes

Common Stock, $.01 Par Value - 1,257,845,514 Shares Outstanding as of June 30, 2005

MBNA CORPORATION

TABLE OF CONTENTS

			Page
PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements (unaudited)

		Consolidated Statements of Financial Condition - June 30, 2005 and December 31, 2004	1
			1

		Consolidated Statements of Income - For the Three and Six Months Ended June 30, 2005, and 2004	2
			2

		Consolidated Statements of Changes in Stockholders' Equity - For the Six Months Ended June 30, 2005 and 2004	3
			3

		Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 2005 and 2004	5
			5

		Notes to the Consolidated Financial Statements	6

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations (unaudited)	21

	Item 3.	Quantitative and Qualitative Disclosure About Market Risk	96

	Item 4.	Controls and Procedures	96

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	97

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	99

	Item 6.	Exhibits	100

	Signature		101

Item 1.

MBNA CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share amounts)

	June 30, 2005			December 31, 2004
	(unaudited)
ASSETS
Cash and due from banks	$	855,693		$	949,706
Interest-earning time deposits in other banks		5,378,502			2,767,831
Federal funds sold		-			1,605,000
Investment securities:
Available-for-sale (amortized cost of $6,778,679 and $6,083,252 at June 30, 2005 and December 31, 2004, respectively)		6,759,630			6,062,520
Held-to-maturity (market value of $295,086 and $300,072 at June 30, 2005 and December 31, 2004, respectively)		293,790			299,074
Loan receivables:
Credit card		17,823,533			20,691,060
Other consumer		10,236,203			9,105,025
Commercial		4,267,060			3,962,765
Total loan receivables		32,326,796			33,758,850
Reserve for possible credit losses		(998,362	)		(1,136,558	)
Net loan receivables		31,328,434			32,622,292
Premises and equipment, net		2,583,125			2,787,755
Accrued income receivable		346,786			397,063
Accounts receivable from securitization		9,569,202			8,443,849
Intangible assets and goodwill, net		3,526,352			3,572,667
Prepaid expenses and deferred charges		343,889			438,804
Other assets		2,050,089			1,767,579
Total assets	$	63,035,492		$	61,714,140

LIABILITIES
Deposits:
Time deposits	$	21,722,990		$	21,789,358
Money market deposit accounts		6,248,567			6,582,997
Noninterest-bearing deposits		2,846,056			2,740,063
Interest-bearing transaction accounts		12,637			49,781
Savings accounts		80,185			77,305
Total deposits		30,910,435			31,239,504
Short-term borrowings		2,746,568			2,104,414
Long-term debt and bank notes		12,739,904			11,422,900
Accrued interest payable		282,870			286,313
Accrued expenses and other liabilities		3,526,564			3,337,757
Total liabilities		50,206,341			48,390,888

STOCKHOLDERS' EQUITY
Preferred stock ($.01 par value, 20,000,000 shares authorized, 8,573,882 shares issued and outstanding at June 30, 2005 and December 31, 2004)		86			86
Common stock ($.01 par value, 1,500,000,000 shares authorized, 1,257,845,514 shares at June 30, 2005, and 1,277,671,875 shares at December 31, 2004, issued and outstanding)		12,578			12,777
Additional paid-in capital		1,478,445			2,026,175
Retained earnings		10,923,587			10,620,838
Accumulated other comprehensive income		414,455			663,376
Total stockholders' equity		12,829,151			13,323,252
Total liabilities and stockholders' equity	$	63,035,492		$	61,714,140

The accompanying notes are an integral part of the consolidated financial statements

-1-

MBNA CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share amounts)(unaudited)



	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2005		2004		2005		2004
Interest Income
Loan receivables	$	894,314	$	830,728	$	1,786,937	$	1,734,110
Investment securities:
Taxable		54,398		28,065		102,249		55,228
Tax-exempt		742		349		1,288		668
Time deposits in other banks		46,371		23,351		82,801		42,089
Federal funds sold		4,152		6,595		9,797		11,622
Other interest income		84,826		78,501		170,688		156,977
Total interest income		1,084,803		967,589		2,153,760		2,000,694

Interest Expense
Deposits		256,319		241,160		501,682		487,159
Short-term borrowings		24,030		18,799		44,975		31,190
Long-term debt and bank notes		150,541		113,385		287,076		220,295
Total interest expense		430,890		373,344		833,733		738,644
Net Interest Income		653,913		594,245		1,320,027		1,262,050
Provision for possible credit losses		172,741		251,557		459,969		616,718
Net interest income after provision for possible credit losses		481,172		342,688		860,058		645,332

Other Operating Income
Securitization income		1,542,849		1,642,633		2,938,321		3,211,175
Interchange		111,668		103,796		217,341		205,369
Credit card loan fees		113,884		117,376		235,278		264,220
Other consumer loan fees		56,042		43,764		102,181		77,018
Commercial loan fees		20,975		16,572		41,141		32,927
Insurance		55,868		45,229		116,003		98,126
Other		30,107		30,250		63,463		53,317
Total other operating income		1,931,393		1,999,620		3,713,728		3,942,152

Other Operating Expense
Salaries and employee benefits		541,186		553,027		1,068,125		1,120,911
Occupancy expense of premises		41,046		46,125		85,586		90,916
Furniture and equipment expense		113,510		97,271		228,247		188,052
Restructuring charge		14,377		-		781,998		-
Other		702,891		675,443		1,375,756		1,413,905
Total other operating expense		1,413,010		1,371,866		3,539,712		2,813,784
Income Before Income Taxes		999,555		970,442		1,034,074		1,773,700
Applicable income taxes		367,409		310,107		370,198		593,657
Net Income	$	632,146	$	660,335	$	663,876	$	1,180,043

Earnings Per Common Share	$	.50	$	.51	$	.52	$	.92
Earnings Per Common Share—Assuming Dilution		.50		.51		.51		.90
Dividends Per Common Share		.14		.12		.28		.24

The accompanying notes are an integral part of the consolidated financial statements

-2-

MBNA CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(dollars in thousands, except per share amounts) (unaudited)



	Outstanding Shares
	Preferred (000)		Common (000)			Preferred Stock		Common Stock
Balance, December 31, 2004		8,574		1,277,672		$	86	$	12,777
Comprehensive income:
Net income		-		-			-		-
Other comprehensive income, net of tax		-		-			-		-
Comprehensive income
Cash dividends:
Common - $.28 per share		-		-			-		-
Preferred		-		-			-		-
Exercise of stock options and other awards		-		17,061			-		170
Stock-based compensation tax benefit		-		-			-		-
Amortization of deferred compensation expense		-		-			-		-
Acquisition and retirement of common stock		-		(36,887	)		-		(369	)
Balance, June 30, 2005		8,574		1,257,846		$	86	$	12,578

Balance, December 31, 2003		8,574		1,277,598		$	86	$	12,776
Comprehensive income:
Net income		-		-			-		-
Other comprehensive income, net of tax		-		-			-		-
Comprehensive income
Cash dividends:
Common - $.24 per share		-		-			-		-
Preferred		-		-			-		-
Exercise of stock options and other awards		-		9,849			-		99
Stock-based compensation tax benefit		-		-			-		-
Amortization of deferred compensation expense		-		-			-		-
Acquisition and retirement of common stock		-		(9,775	)		-		(98	)
Balance, June 30, 2004		8,574		1,277,672		$	86	$	12,777

-3-

MBNA CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - CONTINUED

(dollars in thousands, except per share amounts) (unaudited)



	Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Total Stockholders' Equity
Balance, December 31, 2004	$	2,026,175		$	10,620,838		$	663,376		$	13,323,252
Comprehensive income:
Net income		-			663,876			-			663,876
Other comprehensive income, net of tax		-			-			(248,921	)		(248,921	)
Comprehensive income											414,955
Cash dividends:
Common - $.28 per share		-			(354,095	)		-			(354,095	)
Preferred		-			(7,032	)		-			(7,032	)
Exercise of stock options and other awards		217,674			-			-			217,844
Stock-based compensation tax benefit		43,661			-			-			43,661
Amortization of deferred compensation expense		46,703			-			-			46,703
Acquisition and retirement of common stock		(855,768	)		-			-			(856,137	)
Balance, June 30, 2005	$	1,478,445		$	10,923,587		$	414,455		$	12,829,151

Balance, December 31, 2003	$	2,119,700		$	8,571,174		$	409,304		$	11,113,040
Comprehensive income:
Net income		-			1,180,043			-			1,180,043
Other comprehensive income, net of tax		-			-			(14,401	)		(14,401	)
Comprehensive income											1,165,642
Cash dividends:
Common - $.24 per share		-			(306,632	)		-			(306,632	)
Preferred		-			(7,032	)		-			(7,032	)
Exercise of stock options and other awards		89,819			-			-			89,918
Stock-based compensation tax benefit		30,115			-			-			30,115
Amortization of deferred compensation expense		43,176			-			-			43,176
Acquisition and retirement of common stock		(258,915	)		-			-			(259,013	)
Balance, June 30, 2004	$	2,023,895		$	9,437,553		$	394,903		$	11,869,214

The accompanying notes are an integral part of the consolidated financial statements.

-4-

MBNA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands) (unaudited)

	For the Six Months Ended June 30,
	2005			2004
Operating Activities
Net income	$	663,876		$	1,180,043
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for possible credit losses		459,969			616,718
Depreciation, amortization, and accretion		496,418			457,164
(Benefit) provision for deferred income taxes		(122,122	)		1,786
Decrease in accrued income receivable		42,538			115,886
Increase in accounts receivable from securitization		(1,175,040	)		(1,339,296	)
Increase (decrease) in accrued interest payable		3,569			(33,828	)
Restructuring-related items, excluding benefit plan obligations		236,055			-
Decrease in other operating activities		410,485			25,627
Net cash provided by operating activities		1,015,748			1,024,100
Investing Activities
Net increase in money market instruments		(1,106,925	)		(2,336,397	)
Proceeds from maturities of investment securities available-for-sale		1,143,717			755,901
Purchases of investment securities available-for-sale		(1,868,623	)		(1,697,322	)
Proceeds from maturities of investment securities held-to-maturity		35,097			39,412
Purchases of investment securities held-to-maturity		(29,762	)		(12,857	)
Proceeds from securitization of loans		2,480,529			7,503,777
Acquisitions of businesses, net of cash		(207,922	)		(355,688	)
Loan portfolio acquisitions		(1,350,720	)		(1,286,701	)
Increase in loans due to principal payments to investors in the Corporation's securitization transactions		(4,362,900	)		(4,640,590	)
Net loan repayments		3,153,371			2,780,278
Net purchases of premises and equipment		(221,044	)		(256,655	)
Net cash (used in) provided by investing activities		(2,335,182	)		493,158
Financing Activities
Net (decrease) increase in money market deposit accounts, noninterest-bearing deposits, interest-bearing transaction accounts, and savings accounts		(235,862	)		200,659
Net increase (decrease) in time deposits		44,997			(72,957	)
Net increase (decrease) in short-term borrowings		685,520			(221,952	)
Proceeds from issuance of long-term debt and bank notes		2,055,010			8,962
Maturity of long-term debt and bank notes		(334,067	)		(914,806	)
Proceeds from exercise of stock options and other awards		217,844			89,918
Acquisition and retirement of common stock		(856,137	)		(259,013	)
Dividends paid		(339,028	)		(288,071	)
Net cash provided by (used in) financing activities		1,238,277			(1,457,260	)
Effect of exchange rate changes on cash and due from banks		(12,856	)		(6,181	)
(Decrease) Increase in Cash and Due from Banks		(94,013	)		53,817
Cash and due from banks at beginning of period		949,706			660,022
Cash and due from banks at end of period	$	855,693		$	713,839

Supplemental Disclosure
Interest expense paid	$	814,721		$	757,237
Income taxes paid	$	588,459		$	565,824

The accompanying notes are an integral part of the consolidated financial statements.

-5-

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note A: Basis of Presentation

The accompanying unaudited consolidated financial statements of MBNA Corporation (the “Corporation”) have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The notes to the consolidated financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2004, should be read in conjunction with these consolidated financial statements. Operating results for the six months ended June 30, 2005, are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

Note B: Derivative Financial Instruments And Hedging Activities

The Corporation utilizes certain derivative financial instruments to enhance its ability to manage interest rate risk and foreign currency exchange rate risk that exist as part of its ongoing business operations. Derivative financial instruments are entered into for periods that match the related underlying exposures and do not constitute positions independent of these exposures. The Corporation does not enter into derivative financial instruments for trading purposes, nor is it a party to any leveraged derivative financial instruments. The Corporation can designate derivative financial instruments as either fair value hedges, cash flow hedges, or hedges of net investments. The Corporation can also enter into derivative financial instruments that are not designated as accounting hedges.

During the six months ended June 30, 2005, the Corporation entered into certain financial instruments designated as cash flow hedges to mitigate the exchange rate risk associated with issuing fixed-rate Euro and Dollar-denominated debt. For these instruments, the effective portion of the change in the fair value of the derivative is recorded in other comprehensive income in the consolidated statements of changes in stockholders’ equity and recognized in the consolidated statements of income in the same period during which the hedged transaction impacts earnings. The ineffective portion of the change in the fair value of the derivative is immediately recognized in earnings.

“Note 3: Significant Accounting Policies” of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004, provides further detail regarding the Corporation’s accounting for derivative activities and other significant accounting policies.

Note C: New Accounting Pronouncements

In April 2005, the Securities and Exchange Commission approved a rule delaying the effective date of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“Statement No. 123(R)”) for public companies. Statement No. 123(R) was to be effective for public companies for the first interim or annual reporting period beginning after June 15, 2005, however, it is now effective for public companies for the first annual, rather than interim, reporting period beginning after June 15, 2005. The rule does not change the accounting required by Statement No. 123(R). In accordance with the rule, the Corporation will begin to expense the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award on January 1, 2006. The financial statement impact for the year ended December 31, 2006 is expected to reduce both earnings per common share and earnings per common share - assuming dilution by approximately $.02 per share. Should the planned merger with and into Bank of America Corporation (“Bank of America”) occur prior to January 1, 2006 (the effective date of FAS 123(R)), all options will vest immediately preceding the change of control, and there would be no financial statement impact for the year ended December 31, 2006 to earnings per common share or earnings per common share - assuming dilution. See “Note N: Mergers and Acquisitions” for more information on the proposed merger of the Corporation with and into Bank of America.

-6-

Note D: Stock-Based Employee Compensation

The Corporation has two stock-based employee compensation plans (which are more fully described in “Note 25: Stock-Based Employee Compensation” contained in the Annual Report on Form 10-K for the year ended December 31, 2004). The Corporation measures compensation cost for employee stock options and similar instruments using the intrinsic-value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB Opinion No. 25”), as interpreted by FASB Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation” (“Interpretation No. 44”). Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“Statement No. 123”), as amended, defines a fair-value-based method of accounting for an employee stock option or similar equity instrument. However, it allows an entity to continue to measure compensation cost for those instruments using the intrinsic-value-based method of accounting prescribed by APB Opinion No. 25. As permitted by Statement No. 123, the Corporation elected to retain the intrinsic-value-based method of accounting for employee stock option grants in accordance with APB Opinion No. 25. All options are granted with an exercise price that is not less than the fair market value of the Corporation’s common stock on the date the option is granted. For grants of restricted shares of common stock, the market value of restricted shares at the date of grant is amortized into salaries and employee benefits expense over a 10 year period that approximates the restriction period, or less if the restricted shares had a specific vesting date less than 10 years from the date of grant.

The following table illustrates the effect on net income and earnings per common share as required by Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123” (“Statement No. 148”), if the Corporation had applied the fair value recognition provisions of Statement No. 123 to options-based employee compensation. In accordance with Statement No. 123, the Corporation uses the Black-Scholes option pricing model to value its employee stock option grants. The Black-Scholes option pricing model is one technique allowed to determine the fair value of employee stock options. The model uses various assumptions that can significantly affect the fair value of the employee stock options. The derived fair value estimates cannot be substantiated by comparison to independent markets.

For pro forma purposes, the Corporation amortizes on a straight-line basis the fair value of graded-vesting options.


*Pro Forma* Net Income and Earnings Per Common Share
(dollars in thousands, except per share amounts) (unaudited)
	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004
Net Income
As reported	$	632,146		$	660,335		$	663,876		$	1,180,043
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		10,842			16,862			29,983			28,725
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects		(20,668	)		(30,729	)		(51,074	)		(57,012	)
Pro forma	$	622,320		$	646,468		$	642,785		$	1,151,756

Earnings Per Common Share
As reported	$	.50		$	.51		$	.52		$	.92
Pro forma		.49			.50			.50			.90
Earnings Per Common Share-Assuming Dilution

As reported		.50			.51			.51			.90
Pro forma		.49			.50			.50			.88

During the six months ended June 30, 2005, the Corporation granted options for 40,000 shares to the Corporation’s non-employee directors. No other option grants were made during the six months ended June 30, 2005.

For the six months ended June 30, 2005, 3.1 million shares of restricted common stock were issued under the Corporation's 1997 Long Term Incentive Plan to the Corporation's senior officers. The restricted common stock had an aggregate market value of $76.4 million when issued. Unamortized compensation expense related to all of the Corporation's outstanding restricted stock awards was $204.4 million and $167.3 million at June 30, 2005 and December 31, 2004, respectively. Substantially all restricted common stock awards of the Corporation will vest immediately preceding a change of control. See “Note N: Mergers and Acquisitions” for further detail on the proposed merger of the Corporation with and into Bank of America.

-7-

During the three and six months ended June 30, 2005, the Corporation issued 5.2 million and 17.1 million common shares upon the exercise of stock options and issuance of restricted stock, and purchased 2.4 million and 14.3 million common shares for $44.5 million and $355.5 million, respectively. The Corporation received $81.7 million and $217.8 million in proceeds from the exercise of stock options for the three and six months ended June 30, 2005, respectively.

Note E: Loan Receivables

Included in the Corporation’s loan receivables at June 30, 2005 and December 31, 2004 were loans held for securitization of $5.1 billion and $8.2 billion, respectively.

Note F: Preferred Stock

The Corporation's Board of Directors declared the following quarterly dividends for the Corporation's Series A and Series B Preferred Stock:

			Series A			Series B
Declaration Date	To Stockholders of Record as of	Payment Date	Dividend Rate		Dividend Per Preferred Share	Dividend Rate		Dividend Per Preferred Share

January 20, 2005	March 31, 2005	April 15, 2005	7.50	%	$.46875	5.50	%	$.34380
April 21, 2005	June 30, 2005	July 15, 2005	7.50		.46875	5.50		.34380
July 18, 2005	September 30, 2005	October 17, 2005	7.50		.46875	5.50		.34380

On June 30, 2005, the Corporation announced an Agreement and Plan of Merger (the “Merger Agreement”) with Bank of America. In accordance with the Merger Agreement, the Corporation shall redeem all of its outstanding shares of Series A and Series B Preferred Stock at or prior to closing at a total redemption price of $25 per share, plus any accrued and unpaid dividends.

Note G: Common Stock

The Corporation’s Board of Directors declared the following quarterly dividends for the Corporation’s Common Stock:

Declaration Date	To Stockholders of Record as of	Payment Date	Dividend Per Common Share

January 20, 2005	March 15, 2005	April 1, 2005	$.14
April 21, 2005	June 15, 2005	July 1, 2005	.14
July 18, 2005	September 15, 2005	October 1, 2005	.14

Under the Merger Agreement, the Corporation agreed to limit the payment of quarterly dividends by the Corporation to $.14 or less per share of common stock with record dates and payment dates consistent with the prior year.

The Corporation repurchased 12.6 million shares of common stock for $250.4 million and 22.6 million shares of common stock for $500.7 million during the three and six months ended June 30, 2005, respectively, in connection with the share repurchase program that was approved by the Corporation’s Board of Directors in January 2005. The share repurchase program authorized the repurchase of up to $2 billion of common stock over two years. Under the Corporation’s Merger Agreement with Bank of America, the Corporation agreed to not repurchase shares of common stock without the prior written consent of Bank of America. As a result, the Corporation suspended any share repurchases in connection with this program after June 30, 2005.

-8-

Note H: Earnings Per Common Share

Earnings per common share is computed using net income applicable to common stock and weighted average common shares outstanding during the period. Earnings per common share-assuming dilution is computed using net income applicable to common stock and weighted average common shares outstanding during the period after consideration of the potential dilutive effect of common stock equivalents, based on the treasury stock method using an average market price for the period.


Computation of Earnings Per Common Share
(dollars in thousands, except per share amounts) (unaudited)
	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2005		2004		2005		2004
Earnings Per Common Share
Net income	$	632,146	$	660,335	$	663,876	$	1,180,043
Less: preferred stock dividend requirements		3,516		3,516		7,032		7,032
Net income applicable to common stock	$	628,630	$	656,819	$	656,844	$	1,173,011

Weighted average common shares outstanding (000)		1,260,485		1,277,726		1,268,420		1,277,840

Earnings per common share	$	.50	$	.51	$	.52	$	.92

Earnings Per Common Share - Assuming Dilution
Net income	$	632,146	$	660,335	$	663,876	$	1,180,043
Less: preferred stock dividend requirements		3,516		3,516		7,032		7,032
Net income applicable to common stock	$	628,630	$	656,819	$	656,844	$	1,173,011

Weighted average common shares outstanding (000)		1,260,485		1,277,726		1,268,420		1,277,840
Net effect of dilutive stock options (000)		7,549		19,328		11,602		21,222
Weighted average common shares outstanding and common stock equivalents (000)		1,268,034		1,297,054		1,280,022		1,299,062

Earnings per common share - assuming dilution	$	.50	$	.51	$	.51	$	.90

There were 28.9 million stock options (expiration dates ranging from 2011 to 2015) and 12.7 million stock options (expiration dates ranging from 2011 to 2015) with an average option exercise price of $22.93 and $24.06 per share, outstanding for the three and six months ended June 30, 2005, respectively, that were not included in the computation of earnings per common share-assuming dilution because the stock options’ exercise prices were greater than the average market price of the common shares, for the three and six months ended June 30, 2005.

For the three and six months ended June 30, 2004, all stock options outstanding were included in the computation of earnings per common share-assuming dilution because the stock options’ exercise prices were less than the average market price of the common shares.

-9-

Note I: Off-Balance Sheet Asset Securitization

Off-balance sheet asset securitization removes loan principal receivables from the Corporation’s consolidated statements of financial condition and converts interest income, interchange income, loan fees, insurance income, recoveries on charged-off securitized loans in excess of interest paid to investors, gross credit losses, and other trust expenses into securitization income. The Corporation retains servicing responsibilities for the loans in the trusts and maintains other retained interests in the securitized assets. These retained subordinated interests include an interest-only strip receivable, cash reserve accounts, accrued interest and fees on securitized loans, and other subordinated interests.

In accordance with Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities—a replacement of FASB Statement No. 125” (“Statement No. 140”), the Corporation recognizes an interest-only strip receivable, which represents the contractual right to receive from the trusts interest and other revenue less certain costs over the estimated life of securitized loan principal receivables. The Corporation uses certain key assumptions and estimates in determining the value of the interest-only strip receivable. These key assumptions and estimates include projections concerning interest income, certain fees, charged-off loan recoveries, gross credit losses, contractual servicing fees, and the interest paid to investors. These assumptions are used to determine the excess spread to be earned by the Corporation over the estimated life of the securitized loan principal receivables. Other key assumptions and estimates used by the Corporation include projected loan payment rates, which are used to determine the estimated life of the securitized loan principal receivables, and an appropriate discount rate. The Corporation reviews the key assumptions and estimates used in determining the fair value of the interest-only strip receivable on a quarterly basis and adjusts them as appropriate. Should these assumptions change or actual results differ from projected results, the interest-only strip receivable and securitization income would be affected.

The Corporation’s securitization key assumptions and their sensitivities to adverse changes are presented in the following tables. The adverse changes to the key assumptions and estimates are hypothetical and are presented in accordance with Statement No. 140. The amount of the adverse change has been limited to the recorded amount of the interest-only strip receivable where the hypothetical change exceeds the value of the interest-only strip receivable. The sensitivities do not reflect actions management might take to offset the impact of the possible adverse changes if they were to occur. For discussion of changes in the excess spread, see “Total Other Operating Income” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

-10-


Securitization Key Assumptions and Sensitivities (a): (dollars in thousands)

	June 30, 2005									March 31, 2005
	(unaudited)									(unaudited)

	Credit Card			Other Consumer			Commercial			Credit Card			Other Consumer			Commercial
Interest-only strip receivable	$	789,995		$	182,637		$	4,241		$	896,337		$	182,860		$	2,504
Weighted average life (in years)		.29			.89			.17			.29			.86			.18

Loan payment rate
(weighted average rate)		17.12	%		4.91	%		32.90	%		16.82	%		5.11	%		31.17	%
Impact on fair value of 20% adverse change	$	110,085		$	27,596		$	436		$	125,469		$	27,548		$	293
Impact on fair value of 40% adverse change		188,726			47,462			846			212,205			47,641			511

Gross credit losses (b)
(weighted average rate)		4.90	%		7.14	%		4.82	%		4.99	%		7.31	%		5.44	%
Impact on fair value of 20% adverse change	$	199,613		$	61,253		$	1,743		$	208,890		$	60,512		$	1,902
Impact on fair value of 40% adverse change		398,629			122,507			3,487			416,238			121,025			2,504

Excess spread (c)
(weighted average rate)		3.88	%		4.26	%		2.35	%		4.29	%		4.42	%		1.43	%
Impact on fair value of 20% adverse change	$	157,999		$	36,527		$	848		$	179,267		$	36,572		$	501
Impact on fair value of 40% adverse change		315,998			73,055			1,696			358,535			73,144			1,002

Discount rate
(weighted average rate)		10.50	%		10.50	%		10.50	%		10.50	%		10.50	%		10.50	%
Impact on fair value of 20% adverse change	$	3,578		$	2,276		$	12		$	4,102		$	2,201		$	8
Impact on fair value of 40% adverse change		7,128			4,507			25			8,173			4,360			15

(a) The sensitivities do not reflect actions management might take to offset the impact of possible adverse changes if they were to occur.
(b) Gross credit losses exclude the impact of recoveries; however, recoveries are included in the determination of the excess spread.
(c) Excess spread includes projections of interest income, certain fees, and charged-off loan recoveries, less gross credit losses, contractual servicing fees, and the interest rate paid to investors.

-11-


Securitization Key Assumptions and Sensitivities (a): (dollars in thousands)

	June 30, 2004									March 31, 2004
	(unaudited)									(unaudited)

	Credit Card			Other Consumer			Commercial			Credit Card			Other Consumer			Commercial
Interest-only strip receivable	$	1,164,944		$	145,556		$	5,852		$	1,211,006		$	112,313		$	7,236
Weighted average life (in years)		.32			.89			.17			.33			.90			.18

Loan payment rate
(weighted average rate)		15.38	%		4.93	%		32.56	%		14.47	%		4.87	%		30.52	%
Impact on fair value of 20% adverse change	$	164,179		$	22,128		$	620		$	170,331		$	17,081		$	884
Impact on fair value of 40% adverse change		281,471			38,062			1,175			296,775			29,391			1,491

Gross credit losses (b)
(weighted average rate)		4.98	%		8.25	%		5.29	%		5.07	%		8.64	%		5.76	%
Impact on fair value of 20% adverse change	$	231,720		$	71,151		$	1,781		$	244,497		$	75,350		$	2,054
Impact on fair value of 40% adverse change		463,439			142,302			3,563			488,995			112,313			4,109

Excess spread (c)
(weighted average rate)		5.01	%		3.38	%		3.48	%		5.02	%		2.58	%		4.06	%
Impact on fair value of 20% adverse change	$	232,989		$	29,111		$	1,170		$	242,201		$	22,463		$	1,447
Impact on fair value of 40% adverse change		465,978			58,222			2,341			484,402			44,925			2,894

Discount rate
(weighted average rate)		9.00	%		9.00	%		9.00	%		9.00	%		9.00	%		9.00	%
Impact on fair value of 20% adverse change	$	4,928		$	1,559		$	15		$	5,322		$	1,216		$	19
Impact on fair value of 40% adverse change		9,821			3,092			29			10,604			2,412			38

(a) The sensitivities do not reflect actions management might take to offset the impact of possible adverse changes if they were to occur.
(b) Gross credit losses exclude the impact of recoveries; however, recoveries are included in the determination of the excess spread.
(c) Excess spread includes projections of interest income, certain fees, and charged-off loan recoveries, less gross credit losses, contractual servicing fees, and the interest rate paid to investors.

-12-


Securitization Key Assumptions and Sensitivities (a): (dollars in thousands)

	June 30, 2005									December 31, 2004
	(unaudited)

	Credit Card			Other Consumer			Commercial			Credit Card			Other Consumer			Commercial
Interest-only strip receivable	$	789,995		$	182,637		$	4,241		$	1,133,320		$	155,863		$	3,582
Weighted average life (in years)		.29			.89			.17			.31			.90			.17

Loan payment rate
(weighted average rate)		17.12	%		4.91	%		32.90	%		15.66	%		4.84	%		32.43	%
Impact on fair value of 20% adverse change	$	110,085		$	27,596		$	436		$	159,061		$	23,551		$	383
Impact on fair value of 40% adverse change		188,726			47,462			846			273,059			40,624			720

Gross credit losses (b)
(weighted average rate)		4.90	%		7.14	%		4.82	%		4.88	%		8.25	%		5.13	%
Impact on fair value of 20% adverse change	$	199,613		$	61,253		$	1,743		$	227,384		$	71,908		$	1,732
Impact on fair value of 40% adverse change		398,629			122,507			3,487			454,767			143,817			3,463

Excess spread (c)
(weighted average rate)		3.88	%		4.26	%		2.35	%		4.85	%		3.58	%		2.12	%
Impact on fair value of 20% adverse change	$	157,999		$	36,527		$	848		$	226,664		$	31,173		$	716
Impact on fair value of 40% adverse change		315,998			73,055			1,696			453,328			62,345			1,433

Discount rate
(weighted average rate)		10.50	%		10.50	%		10.50	%		10.00	%		10.00	%		10.00	%
Impact on fair value of 20% adverse change	$	3,578		$	2,276		$	12		$	5,264		$	1,877		$	10
Impact on fair value of 40% adverse change		7,128			4,507			25			10,487			3,719			20

(a) The sensitivities do not reflect actions management might take to offset the impact of possible adverse changes if they were to occur.
(b) Gross credit losses exclude the impact of recoveries; however, recoveries are included in the determination of the excess spread.
(c) Excess spread includes projections of interest income, certain fees, and charged-off loan recoveries, less gross credit losses, contractual servicing fees, and the interest rate paid to investors.

-13-


Securitization Key Assumptions and Sensitivities (a): (dollars in thousands)

	June 30, 2004									December 31, 2003
	(unaudited)

	Credit Card			Other Consumer			Commercial			Credit Card			Other Consumer			Commercial
Interest-only strip receivable	$	1,164,944		$	145,556		$	5,852		$	1,246,656		$	84,043		$	7,362
Weighted average life (in years)		.32			.89			.17			.33			.89			.17

Loan payment rate
(weighted average rate)		15.38	%		4.93	%		32.56	%		14.49	%		4.92	%		32.55	%
Impact on fair value of 20% adverse change	$	164,179		$	22,128		$	620		$	175,404		$	12,785		$	780
Impact on fair value of 40% adverse change		281,471			38,062			1,175			305,720			21,980			1,478

Gross credit losses (b)
(weighted average rate)		4.98	%		8.25	%		5.29	%		5.24	%		9.64	%		5.06	%
Impact on fair value of 20% adverse change	$	231,720		$	71,151		$	1,781		$	250,815		$	83,294		$	1,704
Impact on fair value of 40% adverse change		463,439			142,302			3,563			501,630			84,043			3,409

Excess spread (c)
(weighted average rate)		5.01	%		3.38	%		3.48	%		5.20	%		1.95	%		4.37	%
Impact on fair value of 20% adverse change	$	232,989		$	29,111		$	1,170		$	249,331		$	16,809		$	1,472
Impact on fair value of 40% adverse change		465,978			58,222			2,341			498,662			33,617			2,945

Discount rate
(weighted average rate)		9.00	%		9.00	%		9.00	%		9.00	%		9.00	%		9.00	%
Impact on fair value of 20% adverse change	$	4,928		$	1,559		$	15		$	5,476		$	902		$	19
Impact on fair value of 40% adverse change		9,821			3,092			29			10,913			1,789			37

(a) The sensitivities do not reflect actions management might take to offset the impact of possible adverse changes if they were to occur.
(b) Gross credit losses exclude the impact of recoveries; however, recoveries are included in the determination of the excess spread.
(c) Excess spread includes projections of interest income, certain fees, and charged-off loan recoveries, less gross credit losses, contractual servicing fees, and the interest rate paid to investors.

-14-

Note J: Long-Term Debt and Bank Notes

Long-term debt and bank notes consist of borrowings having an original maturity of one year or more.

During the six months ended June 30, 2005, the Corporation issued long-term debt and bank notes consisting of the following:


Summary of Long-Term Debt and Bank Notes
(dollars in thousands) (unaudited)	Par Value

Fixed-Rate Euro Medium-Term Note, with an interest rate of 3.00%, payable annually, maturing in 2008 (€500.0 million)	$	662,850

Fixed-Rate Euro Medium-Term Note, with an interest rate of 4.47%, payable semi-annually, maturing in 2010		35,000

Fixed-Rate Senior Medium-Term Note, with an interest rate of 5.00%, payable semi-annually, maturing in 2010		250,000

Floating-Rate Senior Medium-Term Note, priced at 43 basis points over the three-month London Interbank Offered Rate, payable quarterly, maturing in 2008		500,000

Fixed-Rate Asset-Backed Notes, with a weighted average interest rate of 4.34%, payable monthly, maturing in varying amounts from 2006 to 2012		370,430

Fixed-Rate Medium-Term Deposit Note, with an interest rate of 4.00%, payable semi-annually, maturing in 2010 (CAD$ 300.0 million)		243,912

During the six months ended June 30, 2005, $100.0 million of Senior Notes, $56.0 million of Bank Notes, $72.7 million of Medium-Term Deposit Notes, and $22.3 million in Loan Notes matured and the Corporation paid down $83.0 million of asset-backed notes assumed in connection with the acquisition of MBNA Practice Solutions, Inc., formerly Sky Financial Solutions, Inc.

Interest Rate and Foreign Exchange Swap Agreements

The Corporation primarily uses interest rate swap agreements and foreign exchange swap agreements to change a portion of fixed-rate long-term debt and bank notes to floating-rate long-term debt and bank notes to more closely match the rate sensitivity of the Corporation’s assets. The Corporation also uses foreign exchange swap agreements to mitigate its foreign currency exchange risk on a portion of long-term debt and bank notes issued by MBNA Europe Bank Limited (“MBNA Europe”). “Note 32: Fair Value of Financial Instruments - Derivative Financial Instruments” of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004, provides further detail regarding the Corporation’s derivative activities.

During the six months ended June 30, 2005, MBNA Europe entered into certain financial instruments designated as cash flow hedges, with total notional values of $697.9 million, related to the issuance of Fixed-Rate Euro Medium-Term Notes. Refer to “Note B: Derivative Financial Instruments and Hedging Activities” for further information regarding the Corporation’s derivative policy related to cash flow hedges.

-15-

Note K: Comprehensive Income

The components of comprehensive income are as follows:


Comprehensive Income
(dollars in thousands) (unaudited)

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004

Net income	$	632,146		$	660,335		$	663,876		$	1,180,043
Other comprehensive income:
Foreign currency translation		(164,332	)		(55,841	)		(249,648	)		4,708
Net unrealized gains (losses) on investment securities available-for-sale, net of tax		31,051			(20,470	)		1,092			(19,109	)
Cash flow hedge adjustment, net of tax		(1,345	)		-			(365	)		-
Other comprehensive income		(134,626	)		(76,311	)		(248,921	)		(14,401	)
Comprehensive income	$	497,520		$	584,024		$	414,955		$	1,165,642

The components of accumulated other comprehensive income are as follows:


Components of Accumulated Other Comprehensive Income
(dollars in thousands)

	June 30, 2005			December 31, 2004
		(unaudited)

Foreign currency translation	$	430,988		$	680,636
Net unrealized losses on investment securities available-for-sale, net of tax		(12,469	)		(13,561	)
Minimum benefit plan liability adjustment, net of tax		(3,699	)		(3,699	)
Cash flow hedge adjustment, net of tax		(365	)		-
Accumulated other comprehensive income	$	414,455		$	663,376

The financial statements of the Corporation’s foreign subsidiaries have been translated into U.S. dollars in accordance with GAAP. Assets and liabilities have been translated using the exchange rate at period end. Income and expense amounts have been translated using the average exchange rate for the period in which the transaction took place. The translation gains and losses resulting from the change in exchange rates have been reported as a component of other comprehensive income included in stockholders’ equity.

Note L: Employee Benefits

Pension Plan and Supplemental Executive Retirement Plan

The Corporation has a noncontributory defined benefit pension plan (“Pension Plan”) and a supplemental executive retirement plan (“SERP”). “Note 24: Employee Benefits” of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004, provides further detail regarding these plans. The components of net periodic benefit cost for the Pension Plan and SERP are presented in the following table.

-16-


Components of Net Periodic Benefit Cost
(dollars in thousands) (unaudited)

	Pension Plan						SERP						Total

	For the Three Months						For the Three Months						For the Three Months
	Ended June 30,						Ended June 30,						Ended June 30,
	2005			2004			2005			2004			2005			2004

Service cost-benefits earned during the period	$	14,867		$	13,987		$	3,301		$	3,065		$	18,168		$	17,052
Interest cost on projected benefit obligation		10,256			7,981			3,918			3,250			14,174			11,231
Expected return on plan assets		(11,340	)		(9,351	)		-			-			(11,340	)		(9,351	)
Net amortization and deferral:
Prior service cost		258			267			820			825			1,078			1,092
Actuarial loss		1,932			2,323			-			-			1,932			2,323
Transition obligation		-			-			98			100			98			100
Net amortization and deferral		2,190			2,590			918			925			3,108			3,515
Net periodic benefit cost		15,973			15,207			8,137			7,240			24,110			22,447
Restructuring charges:
Special termination benefit charge		1,623			-			1,634			-			3,257			-
Curtailment charge		16			-			1,120			-			1,136			-
Total net periodic benefit cost	$	17,612		$	15,207		$	10,891		$	7,240		$	28,503		$	22,447

Assumptions Used to Determine Net Periodic Benefit Cost
Discount rate		6.17	%		6.00	%		6.17	%		6.00	%
Rate of compensation increase		5.00			5.00			5.00			5.00
Expected return on plan assets		8.75			9.00


Components of Net Periodic Benefit Cost
(dollars in thousands) (unaudited)

	Pension Plan						SERP						Total

	For the Six Months						For the Six Months						For the Six Months
	Ended June 30,						Ended June 30,						Ended June 30,
		2005			2004			2005			2004			2005			2004

Service cost-benefits earned during the period	$	30,551		$	30,112		$	7,101		$	7,515		$	37,652		$	37,627
Interest cost on projected benefit obligation		20,456			17,256			8,018			7,000			28,474			24,256
Expected return on plan assets		(22,652	)		(18,851	)		-			-			(22,652	)		(18,851	)
Net amortization and deferral:
Prior service cost		529			542			1,595			1,600			2,124			2,142
Actuarial loss		4,193			5,923			150			400			4,343			6,323
Transition obligation		-			-			198			200			198			200
Net amortization and deferral		4,722			6,465			1,943			2,200			6,665			8,665
Net periodic benefit cost		33,077			34,982			17,062			16,715			50,139			51,697
Restructuring charges:
Special termination benefit charge		78,911			-			69,380			-			148,291			-
Curtailment charge		1,428			-			12,001			-			13,429			-
Total net periodic benefit cost	$	113,416		$	34,982		$	98,443		$	16,715		$	211,859		$	51,697

Assumptions Used to Determine Net Periodic Benefit Cost
Discount rate		6.21	%		6.00	%		6.21	%		6.00	%
Rate of compensation increase		5.00			5.00			5.00			5.00
Expected return on plan assets		8.75			9.00

-17-

During the six months ended June 30, 2005, the Corporation incurred special termination benefit and curtailment charges of $148.3 million and $13.4 million, respectively. These charges relate to Pension Plan and SERP participants that terminated their employment with the Corporation in connection with the restructuring plan implemented during the first quarter of 2005. The assumptions used to determine the restructuring charges were a discount rate of 6.00%, rate of compensation increase of 5.00%, and an expected rate of return on plan assets of 8.75%. The change in the discount rate reflects the current interest rate environment. The Corporation used a measurement date of February 28, 2005 for the restructuring charge. These amounts are included in the restructuring charge on the Corporation’s consolidated statements of income.

See “Note M: Restructuring Charge” for further information on the restructuring charge.

During the three months ended June 30, 2005, the Corporation incurred special termination benefit charges of $5.5 million, unrelated to the restructuring charge, for a SERP participant retiring earlier than expected. This amount is excluded from the components of net periodic benefit cost table.

The Corporation expects to contribute the maximum tax-deductible contribution to the Pension Plan in 2005, which is estimated to be approximately $79 million. For the six months ended June 30, 2005, the Corporation contributed $65.0 million to the Pension Plan.

Postretirement and Postemployment Benefits

The Corporation and its subsidiaries provide certain healthcare and life insurance benefits for certain people upon early retirement through normal retirement age. “Note 24: Employee Benefits” of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004, provides further detail regarding this plan. This plan was opened to certain individuals who would not have otherwise been eligible in connection with the restructuring plan announced during the first quarter of 2005. The Corporation also provides certain other postretirement and postemployment benefits to certain individuals upon leaving the Corporation. These amounts have been accrued and are included in accrued expenses and other liabilities in the Corporation’s statements of financial condition.

Note M: Restructuring Charge

In the first quarter of 2005, in order to achieve staffing levels that meet expected future business needs and make the Corporation more efficient, the Corporation announced and began to implement a restructuring plan. This plan primarily consisted of staff reductions related to voluntary early retirement and voluntary severance programs, contract terminations, and the disposition of fixed assets relating to facility closings.

The Corporation recorded a restructuring charge in other operating expense of $14.4 million pre-tax ($14.7 million net of tax) and $782.0 million pre-tax ($497.0 million net of tax) in connection with its restructuring plan during the three and six months ended June 30, 2005, respectively. The total restructuring charge is expected to be approximately $790 million pre-tax. The difference between the restructuring charge recorded for the six months ended June 30, 2005 and the total expected restructuring charge primarily represents early retirement and severance costs that will be incurred in future periods.

Approximately 85% of the expected restructuring charge will result in future cash expenditures. With the exception of the Corporation’s benefit plan obligations, the majority of the cash expenditures will occur in 2005 and 2006.

-18-

The components of the restructuring charge for the six months ended June 30, 2005 are as follows:


Restructuring Charge
(dollars in thousands) (unaudited)

	Restructuring Charge		Cash Payments		Other Adjustments		Liability Balance at June 30, 2005
Early retirement and severance costs	$	494,907	$	76,957	$	313,823	$	104,127
Contract termination costs		171,074		169,545		1,448		81
Facility costs		113,611		775		108,920		3,916
Other costs		2,406		2,373		-		33
Total	$	781,998	$	249,650	$	424,191	$	108,157

Early retirement and severance costs represent costs incurred through the voluntary early retirement and voluntary severance programs. The contract termination costs were primarily related to a marketing agreement with a third party vendor that marketed the Corporation’s products to endorsing organizations. Management determined this contract was no longer consistent with the Corporation’s long-term objectives. Facility costs include asset disposal, lease termination, and other impairment costs. Other costs include professional fees incurred in connection with the restructuring plan. Other adjustments primarily represent adjustments for noncash charges, the majority of which represent the write down of impaired facilities, and charges that are accounted for as part of the Corporation’s benefit plan obligations as disclosed in “Note L: Employee Benefits”. Included in these other adjustments were $80.3 million related to the Pension Plan, $81.4 million related to the SERP, and $134.6 million related to postretirement and postemployment benefits. These amounts will be included in the actuarial valuation of these obligations in future periods. Accruals for the restructuring charge are primarily included in accrued expenses and other liabilities in the consolidated statements of financial condition at June 30, 2005. The accruals primarily consist of severance costs.

Note N: Mergers and Acquisitions

Merger Announcement

On June 30, 2005, the Corporation announced the Merger Agreement with Bank of America. The Merger Agreement provides for the merger of the Corporation with and into Bank of America. The Merger Agreement has been unanimously approved by the Boards of Directors of both companies and, if the merger is completed, each share of the Corporation’s common stock will be converted into 0.5009 of a share of Bank of America common stock and $4.125 in cash. The completion of the merger is currently anticipated to occur in the fourth quarter of 2005, and is subject to approval of the Corporation’s stockholders, receipt of all requisite governmental approvals (including the approval of the Board of Governors of the Federal Reserve System), and certain other customary conditions. Under the Merger Agreement, the Corporation agreed to limit the payment of quarterly dividends by the Corporation to $.14 or less per share of common stock with record dates and payment dates consistent with the prior year. Also, in accordance with the Merger Agreement, the Corporation shall redeem all of its outstanding shares of Series A and Series B Preferred Stock at or prior to closing at a total redemption price of $25 per share, plus any accrued and unpaid dividends.

To induce Bank of America to enter into the Merger Agreement, the Corporation granted Bank of America an option to purchase up to 249,764,005 shares of the Corporation’s common stock at a price per share of $21.30; however, in no case may Bank of America acquire more than 19.9% of the outstanding shares of the Corporation’s common stock under this stock option agreement. Bank of America cannot exercise the option unless the merger is not completed and specified triggering events occur. These events generally relate to business combinations or acquisition transactions involving the Corporation and a third party. The Corporation is not aware of any event that has occurred as of the date of this document that would allow Bank of America to exercise the option. The option will expire upon completion of the merger.

The option could have the effect of discouraging a company from trying to acquire the Corporation prior to completion of the merger or termination of the Merger Agreement. Upon the occurrence of certain triggering events, the Corporation may be required to repurchase the option and any shares of the Corporation’s common stock purchased under the option at a predetermined price, or Bank of America may choose to surrender the option to the Corporation for a cash payment of $1.0559 billion. In no event will the total profit received by Bank of America with respect to this option exceed $1.4078 billion.

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Acquisition

On May 2, 2005, the Corporation purchased Nexstar Financial Corporation ("Nexstar"). The acquisition was accounted for by allocating the purchase price to the assets acquired and liabilities assumed based on their fair values. As a result of the acquisition, the Corporation recorded goodwill and other intangible assets of approximately $150 million. The purchase price allocation is preliminary pending receipt of valuations of certain assets and liabilities assumed. The Corporation has engaged an outside vendor to assist with these valuations. The results of operations of Nexstar have been included in the Corporation’s consolidated financial statements since the acquisition date. The acquisition of Nexstar was not significant to the Corporation's results of operations for the three or six months ended June 30, 2005.

Nexstar is a mortgage services company that provides lending services in several different product lines that are new for the Corporation. Its services include underwriting and fulfillment activities, as well as mortgage origination functions and services. The acquisition of Nexstar reflects the continuing efforts of the Corporation to diversify into other businesses.

Note O: Subsequent Events

On August 1, 2005, MBNA Europe acquired Marlin House Holdings Limited (“Marlin House”). Marlin House, through its principal subsidiary Loans.co.uk Limited ("Loans.co.uk"), provides loans secured by residential property, which are funded through third-party lenders. Typical Customers use the loans to consolidate their existing debt or acquire financing for new purchases, such as cars or home improvements.

The acquisition was accounted for by allocating the purchase price to the assets acquired and liabilities assumed based on their fair values. As a result of the acquisition, the Corporation recorded goodwill and other intangible assets of approximately $200 million. The purchase price allocation is preliminary pending receipt of valuations of certain assets and liabilities assumed. The Corporation has engaged an outside vendor to assist with these valuations. The acquisition of Marlin House is not expected to be significant to the Corporation's results of operations. The acquisition of Marlin House reflects the continuing efforts of the Corporation to diversify into other businesses.

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ITEM 2.

MBNA CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(unaudited)

This discussion is intended to further the reader’s understanding of the consolidated financial statements, financial condition, and results of operations of MBNA Corporation. It should be read in conjunction with the consolidated financial statements, notes, and tables included in this report

Management's Discussion and Analysis of Financial Condition and Results of Operations
		Page

	Introduction and Overview	22

	Critical Accounting Policies	24

	Restructuring Charge	27

	Earnings Summary	27

	Net Interest Income	32

	Investment Securities and Money Market Instruments	41

	Other Interest-Earning Assets	41

	Loan Receivables	42

	Premises and Equipment	44

	Accrued Income Receivable	44

	Accounts Receivable from Securitization	45

	Prepaid Expenses and Deferred Charges	45

	Other Assets	45

	Interest-Bearing Deposits	45

	Borrowed Funds	46

	Accumulated Other Comprehensive Income	47

	Total Other Operating Income	48

	Total Other Operating Expense	54

	Income Taxes	56

	Loan Quality	57

	Capital Adequacy	73

	Dividend Limitations	74

	Off-Balance Sheet Arrangements	75

	Liquidity and Rate Sensitivity	85

	Regulatory and Other Matters	91

	Important Factors Regarding Forward-Looking Statements	94

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Introduction and Overview

MBNA Corporation (the "Corporation"), a bank holding company located in Wilmington, Delaware, is the parent company of MBNA America Bank, N.A. ("MBNA America"), a national bank and the Corporation's principal subsidiary. The Corporation's primary business is providing its Customers the ability to have what they need today and pay for it out of future income by lending money through its credit card and other loan products. Through MBNA America, the Corporation is the largest independent credit card lender in the world and is the leading issuer of credit cards through endorsed marketing. In addition to its credit card lending, the Corporation also makes other consumer loans, which include installment and revolving unsecured loan products, mortgage loans, aircraft loans, and other specialty lending products to consumers, and commercial loans, which include business card products and other specialty lending products to small businesses. The Corporation also offers insurance and deposit products.

The Corporation makes loans in the United Kingdom ("U.K."), Ireland, and Spain through MBNA America's wholly owned foreign bank subsidiary, MBNA Europe Bank Limited ("MBNA Europe"), and in Canada through MBNA America’s wholly owned foreign bank subsidiary, MBNA Canada Bank ("MBNA Canada"). The Corporation makes its commercial loans and a portion of its other consumer loans in the United States ("U.S.") through another wholly owned subsidiary of the Corporation, MBNA America (Delaware), N.A. ("MBNA Delaware"), a national bank.

The Corporation seeks to achieve its net income and other objectives primarily by attempting to grow loans to generate related interest and other operating income, while controlling loan losses and expense growth. It grows loans by adding new accounts and stimulating usage of existing accounts as well as by portfolio and other business acquisitions. The Corporation generates income through finance charges assessed on outstanding loan receivables, securitization income, interchange income, credit card, other consumer, and commercial loan fees, insurance income, interest earned on investment securities and money market instruments and other interest-earning assets. The Corporation's primary costs are the costs of funding, growing, and servicing its loan receivables, investment securities, and other assets, which include interest paid on deposits, short-term borrowings and long-term debt and bank notes, credit losses, business development and operating expenses, royalties to endorsing organizations, and income taxes.

The Corporation obtains funds to make loans to its Customers primarily through the process of asset securitization, raising deposits, and the issuance of short-term and long-term debt. Asset securitization removes loan principal receivables from the consolidated statements of financial condition through the sale of loan principal receivables to a trust. The trust sells securities backed by those loan principal receivables to investors. The trusts are independent of the Corporation, and the Corporation has no control over the trusts. The trusts are not subsidiaries of the Corporation and are excluded from the Corporation's consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP").

The Corporation allocates resources on a managed basis, and financial data provided to management reflects the Corporation's results on a managed basis. Managed data assumes the Corporation's securitized loan principal receivables have not been sold and presents the earnings on securitized loan principal receivables in the same fashion as the Corporation's owned loans. Management, equity and debt analysts, rating agencies, and others evaluate the Corporation's operations on a managed basis because the loans that are securitized are subject to underwriting standards comparable to the Corporation's owned loans, and the Corporation services the securitized and owned loans, and the related accounts, together and in the same manner without regard to ownership of the loans. In a securitization, the loan principal receivables are sold to the trust, but the account relationships are not sold. The Corporation continues to own and service the accounts that generate the securitized loan principal receivables. The credit performance of the entire managed loan portfolio is important to understand the quality of originations and the related credit risks inherent in the owned portfolio and retained interests in securitization transactions. Off-balance sheet asset securitization has a significant effect on the Corporation's consolidated financial statements. The impact is discussed under "Off-Balance Sheet Arrangements—Impact of Off-Balance Sheet Asset Securitization Transactions on the Corporation's Results." Securitization income is the most significant revenue item and is discussed under "Total Other Operating Income." Whenever managed data is included in this report, a reconciliation of the managed data to the most directly comparable financial measure presented in accordance with GAAP is provided.

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Executive Summary:

Factors affecting the Corporation's results for the second quarter of 2005, as compared to the second quarter of 2004, included a reduction in managed loans outstanding, a lower managed net interest margin, lower total other operating income, improved asset quality trends, higher expenses, the continued impact of the restructuring charge announced during the first quarter of 2005, the share repurchase program, and other items discussed throughout this report. The Corporation attempts to achieve its net income and other objectives by balancing these and other factors.

Highlights for the quarter:

• Loan receivables increased by $1.8 billion to $32.3 billion and managed loans decreased by $794.3 million to $117.4 billion, as compared to June 30, 2004. Management believes that managed loans decreased in 2005 because the Corporation offered less 0% promotional rate offers on U.S. credit card accounts. Also, managed loans outstanding were affected by higher payment volumes from U.S. Credit Card Customers and slower revolving consumer credit growth in the U.S. over the past two to three years. Lastly, managed loans were negatively impacted by the strengthening of the U.S. dollar against foreign currencies during the second quarter of 2005. See "Loan Receivables" for a discussion of the income earned on loan receivables, "Total Other Operating Income—Securitization Income" for a discussion of the income earned on securitized loans, and "Off-Balance Sheet Arrangements—Impact of Off-Balance Sheet Asset Securitization Transactions on the Corporation's Results" for a discussion of the income earned on managed loans.

• The net interest margin increased 39 basis points to 5.48% and the managed net interest margin declined 18 basis points to 7.74% for the three months ended June 30, 2005, as compared to the same period in 2004. See "Net Interest Income—Net Interest Margin" for a discussion of the net interest margin, "Total Other Operating Income—Securitization Income" for a discussion of the net interest margin earned on securitized loans, and "Off-Balance Sheet Arrangements—Impact of Off-Balance Sheet Asset Securitization Transactions on the Corporation's Results" for a discussion of the managed net interest margin.

• Total other operating income decreased by $68.2 million to $1.9 billion for the three months ended June 30, 2005, as compared to the same period in 2004, as a result of the quarterly revaluation of the Corporation’s interest-only strip receivable, which resulted in a loss of $105.5 million, primarily as a result of increases in projected loan repayment rates and decreases in the projected excess spreads. See "Total Other Operating Income" for a discussion of total other operating income.

• Based on improving asset quality trends, the provision for possible credit losses in the second quarter of 2005 was $78.8 million lower than in the second quarter of 2004. Net credit losses on loan receivables declined 108 basis points to 3.52% and net credit losses on managed loans declined 35 basis points to 4.60% for the second quarter of 2005, as compared to the same period in 2004. See "Loan Quality—Net Credit Losses" for a discussion of net credit losses.

• In connection with the restructuring plan announced during the first quarter of 2005, the Corporation incurred a pre-tax charge in other operating expense of $14.4 million ($14.7 million, net of tax) during the second quarter of 2005.

• Total other operating expense, without the restructuring charge, increased $26.8 million or 2.0% for the three months ended June 30, 2005, as compared to the same period in 2004, as a result of the Corporation’s focus on improved efficiency. See “Total Other Operating Expense” for a discussion of total other operating expense.

• The Corporation repurchased 12.6 million shares of common stock for $250.4 million during the second quarter of 2005 in connection with the share repurchase program that was approved by the Corporation’s Board of Directors in January 2005. The share repurchase program authorized the repurchase of up to $2 billion of common stock over two years. Under the Corporation’s Agreement and Plan of Merger (the "Merger Agreement") with and into Bank of America Corporation ("Bank of America"), the Corporation agreed to not repurchase shares of common stock without the prior written consent of Bank of America. As a result, the Corporation suspended any share repurchases in connection with this program after June 30, 2005.

• On May 2, 2005, the Corporation purchased Nexstar Financial Corporation (“Nexstar”), a mortgage services company that gives the Corporation a platform to bring its affinity partner franchise to the home equity market.

These items, as well as other factors, are discussed in further detail throughout "Management's Discussion and Analysis of Financial Condition and Results of Operations."

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New Developments:

• On June 30, 2005, the Corporation announced a Merger Agreement with and into Bank of America. The Merger Agreement provides for the merger of the Corporation with and into Bank of America. The Merger Agreement has been unanimously approved by the Boards of Directors of both companies, and if the merger is completed, each share of the Corporation’s common stock will be converted into 0.5009 of a share of Bank of America common stock and $4.125 in cash. The completion of the merger is currently anticipated to occur in the fourth quarter of 2005, and is subject to approval of the Corporation’s stockholders, receipt of all requisite governmental approvals (including the approval of the Board of Governors of the Federal Reserve System), and certain other customary conditions.

• On August 1, 2005, MBNA Europe acquired Marlin House Holdings Limited (“Marlin House”). Marlin House, through its principal subsidiary Loans.co.uk Limited ("Loans.co.uk"), provides loans secured by residential property, which are funded through third-party lenders. Typical Customers use the loans to consolidate their existing debt or acquire financing for new purchases, such as cars or home improvements.

Critical Accounting Policies

Management makes certain judgments and uses certain estimates and assumptions when applying accounting principles in the preparation of the Corporation’s consolidated financial statements. The nature of the estimates and assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to change. Management has identified the policies related to the accounting for off-balance sheet asset securitization, the reserve for possible credit losses, intangible assets and goodwill, and revenue recognition as critical accounting policies, which require management to make significant judgments, estimates and assumptions.

Management believes the current assumptions and other considerations used to estimate amounts reflected in the Corporation’s consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in the Corporation’s consolidated financial statements, the resulting changes could have a material adverse effect on the Corporation’s consolidated results of operations, and in certain situations, could have a material adverse effect on the Corporation’s financial condition.

The development and selection of the critical accounting policies, and the related disclosures, have been reviewed with the Audit Committee of the Corporation’s Board of Directors.

Off-Balance Sheet Asset Securitization

The Corporation uses securitization of its loan principal receivables as one source to meet its funding needs. The Corporation accounts for its securitization transactions in accordance with Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities—a replacement of FASB Statement No. 125” (“Statement No. 140”), issued by the Financial Accounting Standards Board (“FASB”). When the Corporation securitizes loan principal receivables, the Corporation recognizes a gain on sale and retained beneficial interests, including an interest-only strip receivable. The interest-only strip receivable represents the contractual right to receive interest and other revenue less certain costs from the trust over the estimated life of the securitized loan principal receivables. The Corporation’s securitization trusts are qualified special-purpose entities as defined by Statement No. 140 that are specifically exempted from the requirements of FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51” (“Interpretation No. 46(R)”).

The Corporation estimates the fair value of the interest-only strip receivable based on the present value of expected future net revenue flows. Since quoted market prices for the interest-only strip receivable are not available, management uses certain assumptions and estimates in determining the fair value of the interest-only strip receivable. These assumptions and estimates include projections of interest income, certain fees, recoveries on charged-off securitized loans, gross credit losses on securitized loans, contractual servicing fees, and the interest paid to investors in a securitization transaction (“excess spread”). These projections are used to estimate the excess spread to be earned by the Corporation over the estimated life of the securitized loan principal receivables. The other assumptions and estimates used by the Corporation in estimating the fair value of the interest-only strip receivable include projected loan payment rates, which are used to determine the estimated life of the securitized loan principal receivables, and an appropriate discount rate.

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The assumptions and estimates used to estimate the fair value of the interest-only strip receivable at June 30, 2005, reflect management’s judgment as to the expected excess spread to be earned and projected loan payment rates to be experienced on the securitized loans. These estimates are likely to change in the future, as the individual components of the excess spread and projected loan payment rates are sensitive to market and economic conditions. For example, the rates paid to investors in the Corporation’s securitization transactions are primarily variable rates subject to change based on changes in market interest rates. Changes in market interest rates and competitive pressures can also affect the projected interest income on securitized loans, as the Corporation could reprice the managed loan portfolio. Credit loss projections could change in the future based on changes in the credit quality of the securitized loans, the Corporation’s account management and collection practices, and general economic conditions. Projected loan payment rates could fluctuate based on general economic conditions and competition from other lenders or other loan products, such as home equity loans. Actual and expected changes in these assumptions may result in future estimates of the excess spread and projected loan payment rates being materially different from the estimates used in the periods covered by this report.

On a quarterly basis, the Corporation reviews prior assumptions and estimates and compares the results to actual trust performance and other factors for the prior period that approximates the average life of the securitized loan receivables. Based on this review and the Corporation’s current assumptions and estimates for future periods, the Corporation adjusts as appropriate, the assumptions and estimates used in determining the fair value of the interest-only strip receivable. If the assumptions change, or actual results differ from projected results, the interest-only strip receivable and securitization income would be affected. If management had made different assumptions for the periods covered by this report that raised or lowered the excess spread or projected loan payment rates, the Corporation’s financial condition and results of operations could have differed materially. For example, a 20% change in the excess spread assumption for all securitized loan principal receivables could have resulted in a change of approximately $195 million in the value of the total interest-only strip receivable at June 30, 2005, and a related change in securitization income.

“Note I: Off-Balance Sheet Asset Securitization” to the consolidated financial statements provides further detail regarding the Corporation’s assumptions and estimates used in determining the fair value of the interest-only strip receivable and their sensitivities to adverse changes.

Reserve For Possible Credit Losses

The Corporation maintains the reserve for possible credit losses at an amount sufficient to absorb losses inherent in the Corporation’s loan principal receivables at the reporting date based on a projection of probable net credit losses. To project probable net credit losses, the Corporation regularly performs a migration analysis of delinquent and current accounts and prepares a bankruptcy filing forecast. A migration analysis is a technique used to estimate the likelihood that a loan receivable may progress through the various delinquency stages and ultimately charge off. The bankruptcy filing forecast is based upon an analysis of historical filings, industry trends, and estimates of future filings. On a quarterly basis, the Corporation reviews and adjusts, as appropriate, these estimates. The Corporation’s projection of probable net credit losses considers the impact of economic conditions on the borrowers’ ability to repay, past collection experience, the risk characteristics and composition of the portfolio, and other factors. The Corporation then reserves for the projected probable net credit losses based on its projection of these amounts. Certain commercial loans are evaluated for impairment on a loan-by-loan basis, based on size and other factors. When indicated by that loan-by-loan evaluation, specific reserve allocations are made to reflect inherent losses. The Corporation establishes appropriate levels of the reserve for possible credit losses for its loan products, including credit card, other consumer, and commercial loans based on their risk characteristics. A provision is charged against earnings to maintain the reserve for possible credit losses at an appropriate level. The Corporation records acquired reserves for current period loan acquisitions.

The Corporation’s projections of probable net credit losses are inherently uncertain, and as a result the Corporation cannot predict with certainty the amount of such losses. Changes in economic conditions, the risk characteristics and composition of the portfolio, bankruptcy laws or regulatory policies, and other factors could impact the Corporation’s actual and projected net credit losses and the related reserve for possible credit losses. If management had made different assumptions about probable net credit losses, the Corporation’s financial condition and results of operations could have differed materially. For example, a 10% change in management’s projection of probable net credit losses could have resulted in a change of approximately $100 million in the reserve for possible credit losses and a related change in the provision for possible credit losses at June 30, 2005.

“Loan Quality” provides further detail regarding the Corporation’s reserve for possible credit losses.

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Intangible Assets and Goodwill

The Corporation’s intangible assets are primarily comprised of purchased credit card relationships (“PCCRs”), which are carried at net book value. The Corporation records PCCRs as part of the acquisition of credit card and business card loans and the corresponding Customer relationships. PCCRs are amortized over the period the assets are expected to contribute to the cash flows of the Corporation, which reflect the expected pattern of benefit. PCCRs are amortized using an accelerated method based upon the projected cash flows the Corporation will receive from the Customer relationships during the estimated useful lives of the PCCRs.

The Corporation’s PCCRs are subject to impairment tests in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“Statement No. 144”). The Corporation reviews the carrying value of its PCCRs for impairment on a quarterly basis, or sooner, whenever events or changes in circumstances indicate that their carrying amount may not be fully recoverable, by comparing their carrying value to the sum of the undiscounted expected future cash flows from the loans and corresponding credit card and business card relationships. In accordance with Statement No. 144, an impairment exists if the sum of the undiscounted expected future cash flows is less than the carrying amount of the asset. An impairment would result in a write-down of the PCCRs to their estimated fair value based on the discounted future cash flows expected from the PCCRs. The Corporation performs a quarterly impairment test on a specific portfolio basis, since it represents the lowest level for which identifiable cash flows are independent of the cash flows of other assets and liabilities.

The Corporation makes certain estimates and assumptions that affect the determination of the expected future cash flows from the loans and corresponding credit card and business card relationships. These estimates and assumptions include levels of account usage and activation, active account attrition, funding costs, credit loss experience, servicing costs, growth in average account balances, interest and fees assessed on loans, and other factors. Significant changes in these estimates and assumptions could result in an impairment of the PCCRs.

The estimated undiscounted cash flows of acquired Customer credit card and business card relationships exceeds the $3.0 billion net book value of the Corporation’s PCCRs at June 30, 2005 by approximately $3.2 billion. If the active account attrition rates for all acquired portfolios in the twelve month period following June 30, 2005, were to be 10 percentage points higher than the rates assumed by management when it valued the PCCRs (for example, the assumed attrition rates were 10% but the actual rates were 20%) and all other estimates and assumptions were held constant, the estimated undiscounted cash flows of acquired Customer accounts in the aggregate would still exceed the net book value of acquired Customer accounts by approximately $2.6 billion, and no material impairment would result on any individual PCCR.

In addition to PCCRs, the Corporation has other purchased relationships, goodwill, and a benefit plan intangible asset. The other purchased relationships relate primarily to the Corporation’s broker relationships acquired in the first quarter of 2004 as a result of the Premium Credit Limited (“PCL”) acquisition. Other purchased relationships are carried at net book value and are amortized over the period the assets are expected to contribute to the cash flows of the Corporation. The Corporation’s other purchased relationships are subject to impairment tests in accordance with Statement No. 144. Goodwill is recorded as part of the Corporation’s acquisitions of businesses where the purchase price exceeds the fair market value of the net tangible and identifiable intangible assets. The Corporation’s goodwill is not amortized, but rather is subject to an annual impairment test in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”.

There were no impairment write-downs of intangible assets during the six months ended June 30, 2005.

Revenue Recognition

Interest income is recognized based upon the amount of loans outstanding and their contractual annual percentage rates. Interest income is included in loan receivables when billed to the Customer. The Corporation accrues unbilled interest income on a monthly basis from the Customer’s statement billing cycle date to the end of the month. The Corporation uses certain estimates and assumptions (for example, estimated yield) in the determination of the accrued unbilled portion of interest income that is included in accrued income receivable in the Corporation’s consolidated statements of financial condition. The Corporation also uses certain assumptions and estimates in the valuation of the accrued interest on securitized loans, which is included in accounts receivable from securitization in the Corporation’s consolidated statements of financial condition. If management had made different assumptions about the determination of the accrued unbilled portion of interest income and the valuation of accrued interest on securitized loans, the Corporation’s financial condition and results of operations could have differed materially. For example, a 10% change in management’s projection of the estimated yield on its loan receivables and the valuation of the accrued interest receivable on securitized loans could have resulted in a change totaling approximately $67 million in interest income and other operating income at June 30, 2005.

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The Corporation recognizes fees (except annual fees) on loan receivables in earnings as the fees are assessed according to agreements with the Corporation’s Customers. Credit card, other consumer, and commercial loan fees include annual, late, overlimit, returned check, cash advance, express payment, and other miscellaneous fees. These fees are included in the Corporation’s loan receivables when billed. Annual fees on credit card and business card loans and their incremental direct loan origination costs are deferred and amortized on a straight-line basis over the one-year period to which they pertain. Overlimit fees are accrued for and included in earnings upon the Customers exceeding their credit limit and are billed to the Customers and included in loan receivables at the end of the billing cycle for their accounts.

The Corporation adjusts the amount of interest and fee income on loan receivables recognized in the current period for its estimate of interest and fee income that it does not expect to collect in subsequent periods through adjustments to the respective income statement captions, loan receivables, and accrued income receivable. The estimate of uncollectible interest and fees is based on a migration analysis of delinquent and current loan receivables that may progress through the various delinquency stages and ultimately charge off, as well as a bankruptcy filing forecast. The bankruptcy filing forecast is based upon an analysis of historical filings, industry trends, and estimates of future filings. The Corporation also adjusts the estimated value of accrued interest and fees on securitized loans for the amount of uncollectible interest and fees that are not expected to be collected through an adjustment to accounts receivable from securitization and securitization income. This estimate is also based on a migration analysis of delinquent and current securitized loans that may progress through the various delinquency stages and ultimately charge off, as well as a bankruptcy filing forecast. On a quarterly basis, the Corporation reviews and adjusts, as appropriate, these estimates.

If management had made different assumptions about uncollectible interest and fees on its loan receivables and its securitized loans, the Corporation’s financial condition and results of operations could have differed materially. For example, a 10% change in management’s estimate of uncollectible interest and fees could have resulted in a change totaling approximately $30 million in interest income and other operating income at June 30, 2005.

Restructuring Charge

Net income for the three and six months ended June 30, 2005 included a restructuring charge of $14.4 million pre-tax ($14.7 million net of tax) and $782.0 million pre-tax ($497.0 million net of tax) or $.01 and $.39 per common share - assuming dilution, respectively. In this report, various items are presented excluding the restructuring charge. Management believes this presentation is useful to investors because the restructuring charge had a material impact on the results of operations for the six months ended June 30, 2005, but not for the six months ended June 30, 2004. As a result, the business factors and trends affecting the Corporation’s results for these periods, in certain cases, are better analyzed without the impact of the restructuring charge.

Earnings Summary

Net income for the three months ended June 30, 2005 decreased to $632.1 million or $.50 per common share as compared to $660.3 million or $.51 per common share for the same period in 2004. Net income for the six months ended June 30, 2005 decreased to $663.9 million or $.51 per common share as compared to $1.2 billion or $.90 per common share for the same period in 2004. Net income for the six months ended June 30, 2005 included the restructuring charge of $782.0 million pre-tax ($497.0 million net of tax) or $.39 per common share. Excluding the restructuring charge, net income for the six months ended June 30, 2005 would have been $1.2 billion or $.90 per common share. All earnings per common share amounts are presented assuming dilution.

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Table 1 reconciles the Corporation’s earnings per common share to earnings per common share excluding the restructuring charge.


Table 1: Reconciliation of Earnings Per Common Share to Earnings Per Common Share Excluding the Restructuring Charge
(dollars in thousands, except per share amounts) (unaudited)
	For the Three Months			For the Six Months
	Ended June 30, 2005			Ended June 30, 2005

Earnings Per Common Share

Income before income taxes	$	999,555		$	1,034,074
Applicable income taxes		367,409			370,198
Net income		632,146			663,876
Less: preferred stock dividend requirements		3,516			7,032
Net income applicable to common stock	$	628,630		$	656,844
Weighted average common shares outstanding (000)		1,260,485			1,268,420
Earnings per common share	$	.50		$	.52

Earnings Per Common Share—Assuming Dilution

Income before income taxes	$	999,555		$	1,034,074
Applicable income taxes		367,409			370,198
Net income		632,146			663,876
Less: preferred stock dividend requirements		3,516			7,032
Net income applicable to common stock	$	628,630		$	656,844
Weighted average common shares outstanding and common stock equivalents (000)		1,268,034			1,280,022
Earnings per common share—assuming dilution	$	.50		$	.51

Restructuring Charge Impact

Pre-tax restructuring charge	$	14,377		$	781,998
Applicable income taxes		(310	)		284,983
Restructuring charge, net of tax	$	14,687		$	497,015

Earnings Per Common Share Excluding the Restructuring Charge

Earnings Per Common Share

Income before income taxes	$	1,013,932		$	1,816,072
Applicable income taxes		367,099			655,181
Net income		646,833			1,160,891
Less: preferred stock dividend requirements		3,516			7,032
Net income applicable to common stock	$	643,317		$	1,153,859
Weighted average common shares outstanding (000)		1,260,485			1,268,420
Earnings per common share	$	.51		$	.91

Earnings Per Common Share—Assuming Dilution

Income before income taxes	$	1,013,932		$	1,816,072
Applicable income taxes		367,099			655,181
Net income		646,833			1,160,891
Less: preferred stock dividend requirements		3,516			7,032
Net income applicable to common stock	$	643,317		$	1,153,859
Weighted average common shares outstanding and common stock equivalents (000)		1,268,034			1,280,022
Earnings per common share—assuming dilution	$	.51		$	.90

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Earnings for the three and six months ended June 30, 2005 were relatively unchanged, compared to the same period in 2004, excluding the restructuring charge, primarily as a result of an increase in net interest income and a decrease in the provision for possible credit losses, offset by a decrease in other operating income and an increase in the effective income tax rate.

Table 2 summarizes the Corporation’s consolidated statements of income, which has been derived from the consolidated financial statements, for the three and six months ended June 30, 2005 and 2004.

Table 2: Summarized Consolidated Statements of Income

(dollars in thousands, except per share amounts) (unaudited)

	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2005		2004		2005		2004

Total interest income	$	1,084,803	$	967,589	$	2,153,760	$	2,000,694
Total interest expense		430,890		373,344		833,733		738,644
Net interest income		653,913		594,245		1,320,027		1,262,050
Provision for possible credit losses		172,741		251,557		459,969		616,718
Net interest income after provision for possible credit losses		481,172		342,688		860,058		645,332

Total other operating income		1,931,393		1,999,620		3,713,728		3,942,152
Total other operating expense		1,413,010		1,371,866		3,539,712		2,813,784
Income before income taxes		999,555		970,442		1,034,074		1,773,700
Applicable income taxes		367,409		310,107		370,198		593,657
Net income	$	632,146	$	660,335	$	663,876	$	1,180,043

Earnings per common share	$	.50	$	.51	$	.52	$	.92
Earnings per common share—assuming dilution		.50		.51		.51		.90
Dividends per common share		.14		.12		.28		.24

Ending loan receivables increased $1.8 billion or 6.0% at June 30, 2005, as compared to June 30, 2004. Total managed loans decreased $794.3 million at June 30, 2005, as compared to June 30, 2004. Average loan receivables increased $1.5 billion or 5.2% and $469.7 million or 1.5% for the three and six months ended June 30, 2005, as compared to the same periods in 2004, respectively. Total average managed loans decreased $451.1 million and $104.9 million for the three and six months ended June 30, 2005, as compared to the same periods in 2004, respectively.

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Table 3 reconciles the Corporation’s loan receivables to its managed loans and average loan receivables to its average managed loans.

Table 3: Reconciliation of Loan Receivables to Managed Loans

(dollars in thousands) (unaudited)


	June 30,
		2005		2004
At Period End:
Loan receivables	$	32,326,796	$	30,496,970
Securitized loans		85,088,774		87,712,921
Total managed loans	$	117,415,570	$	118,209,891


	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,

		2005		2004		2005		2004

Average for the Period:
Loan receivables	$	31,073,912	$	29,550,080	$	31,404,797	$	30,935,054
Securitized loans		85,577,403		87,552,295		85,939,227		86,513,919
Total managed loans	$	116,651,315	$	117,102,375	$	117,344,024	$	117,448,973

Interest income increased $117.2 million or 12.1% and $153.1 million or 7.7% for the three and six months ended June 30, 2005, as compared to the same periods in 2004, respectively. Interest expense increased $57.5 million or 15.4% and $95.1 million or 12.9% for the three and six months ended June 30, 2005, as compared to the same periods in 2004, respectively. These increases in interest income and interest expense primarily reflect increases in overall market rates.

The provision for possible credit losses decreased $78.8 million or 31.3% and $156.7 million or 25.4% for the three and six months ended June 30, 2005, as compared to the same periods in 2004, respectively. The decrease in the provision for possible credit losses was based on improving asset quality trends, enhanced collection strategies, and an improved economy.

The net credit loss ratio on loan receivables for the three and six months ended June 30, 2005 was 3.52% and 3.76%, respectively. The net credit loss ratio on managed loans for the three and six months ended June 30, 2005 was 4.60% and 4.54%, respectively. Delinquency on loan receivables and managed loans at June 30, 2005 was 2.71% and 3.98%, respectively. See “Loan Quality—Net Credit Losses” for further detail regarding net credit losses. Refer to Table 19 for a reconciliation of the loan receivables net credit loss ratio to the managed net credit loss ratio for the three and six months ended June 30, 2005. See “Loan Quality—Delinquencies” for further detail regarding delinquencies. Refer to Table 14 for a reconciliation of the loan receivables delinquency ratio to the managed delinquency ratio at June 30, 2005.

Other operating income decreased $68.2 million or 3.4% and $228.4 million or 5.8% for the three and six months ended June 30, 2005, as compared to the same periods in 2004, respectively. This decrease was primarily the result of the net loss from securitization activity of $105.5 million and $312.1 million caused by the net revaluation of the interest-only strip receivable for the three and six months ended June 30, 2005, as compared to a net loss of $26.8 million and $48.7 million for the same periods in 2004, respectively.

Other operating expense increased $41.1 million or 3.0% and $725.9 million or 25.8% for the three and six months ended June 30, 2005, as compared to the same periods in 2004, respectively. Excluding the restructuring charge, other operating expense for the six months ended June 30, 2005 would have decreased $56.1 million or 2.0%, as compared to the same period in 2004.

The Corporation’s applicable income taxes increased $57.3 million or 18.5% for the three months ended June 30, 2005 and decreased $223.5 million or 37.6% for the six months ended June 30, 2005, as compared to the same periods in 2004. These amounts represent an effective tax rate of 36.8% and 35.8% for the three and six months ended June 30, 2005, respectively, as compared to 32.0% and 33.5% for the same periods in 2004.

-30-

Table 4 reconciles the Corporation’s other operating expense to other operating expense excluding the restructuring charge.


Table 4: Reconciliation of Other Operating Expense to Other Operating Expense Excluding the Restructuring Charge
(dollars in thousands) (unaudited)
	For the Three Months		For the Six Months
	Ended June 30, 2005		Ended June 30, 2005


Other operating expense	$	1,413,010	$	3,539,712
Impact of the restructuring charge		14,377		781,998
Other operating expense excluding the restructuring charge	$	1,398,633	$	2,757,714

The Corporation’s return on average total assets for the three and six months ended June 30, 2005, was 4.14% and 2.18%, as compared to 4.40% and 3.93% for the same periods in 2004, respectively. Excluding the restructuring charge, the Corporation’s return on average total assets for the three and six months ended June 30, 2005 would have been 4.22% and 3.81%, respectively. The Corporation’s return on average stockholders’ equity was 19.65% and 10.12% for the three and six months ended June 30, 2005, as compared to 22.56% and 19.95% for the same periods in 2004, respectively. Excluding the restructuring charge, the Corporation’s return on average stockholders’ equity for the three and six months ended June 30, 2005 would have been 19.39% and 17.34%, respectively.

Table 5 reconciles the Corporation’s return on average total assets and average stockholders’ equity to the return on average total assets and average stockholders’ equity excluding the restructuring charge.


Table 5: Reconciliation of the Return on Average Total Assets and Average Stockholders’ Equity to the Return on Average Total Assets and Average Stockholders’ Equity Excluding the Restructuring Charge
(dollars in thousands) (unaudited)

For the Three Months Ended June 30, 2005	Average Balance		Ratio			Net Income
Return on Average Total Assets
Return on average total assets	$	61,296,671		4.14	%	$	632,146
Impact of the restructuring charge		187,629					14,687
Return on average total assets excluding the restructuring charge	$	61,484,300		4.22		$	646,833

Return on Average Stockholders’ Equity
Return on average stockholders’ equity	$	12,905,151		19.65		$	632,146
Impact of the restructuring charge		474,761					14,687
Return on average stockholders' equity excluding the restructuring charge	$	13,379,912		19.39		$	646,833


For the Six Months Ended June 30, 2005
Return on Average Total Assets
Return on average total assets	$	61,376,125		2.18		$	663,876
Impact of the restructuring charge		94,765					497,015
Return on average total assets excluding the restructuring charge	$	61,470,890		3.81		$	1,160,891

Return on Average Stockholders’ Equity
Return on average stockholders’ equity	$	13,227,083		10.12		$	663,876
Impact of the restructuring charge		272,669					497,015
Return on average stockholders’ equity excluding the restructuring charge	$	13,499,752		17.34		$	1,160,891

-31-

Net Interest Income

Net interest income represents interest income on total interest-earning assets, on a fully taxable equivalent basis, where appropriate, less interest expense on total interest-bearing liabilities. Fully taxable equivalent basis represents the income on total interest-earning assets that is either tax-exempt or taxed at a reduced rate, adjusted to give effect to the prevailing incremental federal income tax rate, and adjusted for nondeductible carrying costs and state income taxes, where applicable. Yield calculations, where appropriate, include these adjustments.

Net interest income, on a fully taxable equivalent basis, increased $59.9 million or 10.1% and $58.3 million or 4.6% for the three and six months ended June 30, 2005, from the same periods in 2004, respectively.

Average Interest-Earning Assets

Average interest-earning assets increased $859.9 million or 1.8% for the three months ended June 30, 2005, from the same period in 2004. The increase in average interest-earning assets was primarily the result of an increase in average investment securities of $1.8 billion and average loan receivables of $1.5 billion partially offset by a decrease in average money market instruments of $2.1 billion. The yield on average interest-earning assets increased 82 basis points for the three months ended June 30, 2005, from the same period in 2004. The increase in the yield earned on average interest-earning assets was primarily the result of the increase in the yield earned on average investment securities and money market instruments and average loan receivables.

Average interest-earning assets increased $951.5 million or 2.0% for the six months ended June 30, 2005, from the same period in 2004. The increase in average interest-earning assets was primarily the result of an increase in average investment securities of $1.9 billion and an increase in average loan receivables of $469.7 million partially offset by a decrease in average money market instruments of $1.3 billion. The yield on average interest-earning assets increased 49 basis points for the six months ended June 30, 2005, from the same period in 2004. The increase in the yield earned on average interest-earning assets was primarily the result of the increase in the yield earned on average investment securities and money market instruments and average loan receivables.

Average Interest-Bearing Liabilities

Average interest-bearing liabilities decreased $516.3 million or 1.2% for the three months ended June 30, 2005, from the same period in 2004. The decrease in average interest-bearing liabilities was a result of a decrease of $929.3 million in average interest-bearing deposits partially offset by an increase of $413.0 million in average borrowed funds. The increase in the rate paid on average interest-bearing liabilities of 58 basis points for the three months ended June 30, 2005, from the same period in 2004, was primarily the result of the increase in the rate paid on average borrowed funds and average interest-bearing deposits.

Average interest-bearing liabilities decreased $739.1 million or 1.7% for the six months ended June 30, 2005, from the same period in 2004. The decrease in average interest-bearing liabilities was a result of a decrease of $866.3 million in average interest-bearing deposits partially offset by an increase of $127.2 million in average borrowed funds. The increase in the rate paid on average interest-bearing liabilities of 52 basis points for the six months ended June 30, 2005, from the same period in 2004, was primarily the result of the increase in the rate paid on average borrowed funds and average interest-bearing deposits.

Net Interest Margin

The net interest margin represents net interest income on a fully taxable equivalent basis expressed as a percentage of average total interest-earning assets. The Corporation’s net interest margin, on a fully taxable equivalent basis, increased 39 basis points and 15 basis points for the three and six months ended June 30, 2005, from the same periods in 2004, respectively, primarily as a result of the Corporation’s net interest income growing at a faster rate than its average interest-earning assets.

See “Off-Balance Sheet Arrangements—Impact of Off-Balance Sheet Asset Securitization Transactions on the Corporation’s Results” for a discussion of the managed net interest margin and a reconciliation of the net interest margin ratio to the managed net interest margin ratio.

Tables 6 and 7 provide further detail regarding the Corporation’s average balances, yields and rates, interest income and expense, and the impact that rate and volume changes had on the Corporation’s net interest income for the three and six months ended June 30, 2005 and 2004.

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Table 6: Statements of Average Balances, Yields and Rates, Income or Expense
(dollars in thousands, yields and rates on a fully taxable equivalent basis) (unaudited)

For the Three Months Ended June 30,	2005								2004
	Average Balance			Yield/ Rate			Income or Expense		Average Balance			Yield/ Rate			Income or Expense
Assets
Interest-earning assets:
Money market instruments:
Interest-earning time deposits in other banks:
Domestic	$	152,115			1.99	%	$	753	$	114,347			.72	%	$	206
Foreign		5,163,565			3.54			45,618		5,295,985			1.76			23,145
Total interest-earning time deposits in other banks		5,315,680			3.50			46,371		5,410,332			1.74			23,351
Federal funds sold		567,967			2.93			4,152		2,623,209			1.01			6,595
Total money market instruments		5,883,647			3.44			50,523		8,033,541			1.50			29,946
Investment securities (a):
Domestic:
Taxable		6,526,459			3.08			50,142		4,652,003			1.97			22,765
Tax-exempt (b)		109,544			4.32			1,180		112,432			2.05			574
Total domestic investment securities		6,636,003			3.10			51,322		4,764,435			1.97			23,339
Foreign		441,955			3.86			4,256		524,710			4.06			5,300
Total investment securities		7,077,958			3.15			55,578		5,289,145			2.18			28,639
Other interest-earning assets (a)		3,821,739			8.90			84,826		4,124,561			7.65			78,501
Loan receivables:
Domestic:
Credit card		9,619,227			12.45			298,593		13,015,494			11.34			367,052
Other consumer		6,849,492			13.07			223,159		5,483,408			13.58			185,077
Commercial		3,008,640			8.66			64,940		2,339,889			8.13			47,295
Total domestic loan receivables		19,477,359			12.08			586,692		20,838,791			11.57			599,424
Foreign:
Credit card		7,193,309			11.58			207,727		4,619,754			12.12			139,196
Other consumer		3,216,525			9.11			73,038		3,007,709			9.35			69,894
Commercial		1,186,719			9.08			26,857		1,083,826			8.24			22,214
Total foreign loan receivables		11,596,553			10.64			307,622		8,711,289			10.68			231,304
Total loan receivables		31,073,912			11.54			894,314		29,550,080			11.31			830,728
Total interest-earning assets		47,857,256			9.10			1,085,241		46,997,327			8.28			967,814
Cash and due from banks		966,689								946,238
Premises and equipment, net		2,638,262								2,697,104
Other assets		10,950,360								11,012,674
Reserve for possible credit losses		(1,115,896	)							(1,257,911	)
Total assets	$	61,296,671							$	60,395,432

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Table 6: Statements of Average Balances, Yields and Rates, Income or Expense-Continued

(dollars in thousands, yields and rates on a fully taxable equivalent basis) (unaudited)

For the Three Months Ended June 30,

2005

2004

Average

Balance

Yield/

Rate

Income

Expense

Average

Balance

Yield/

Rate

Income

Expense

Liabilities and Stockholders' Equity

MBNA CORP 10-Q