Updated from 10:59 a.m. EDT

Shares of credit card giant

MBNA

( KRB) were getting squeezed in Thursday trading, after the company announced a 94% decline in first-quarter profits and offered a dismal earnings outlook for the rest of the year.

The Delaware-based card company's stock plunged $3.70, or 16%, to $19.41.

In the quarter, MBNA said profits fell to $31.7 million, or 2 cents a share, down from $519.7 million, or 4 cents a share, as the result of a $767 million pretax restructuring charge.

Without the charge, the card company said it would have earned $514 million, or 40 cents a share. MBNA's operating figure, however, fell 6 cents shy of the Thomson Financial consensus estimate.

To compound matters, MBNA, in a press release, said that on the basis of the current trend, it expects full-year earnings to come in "significantly below its 10% growth objective."

"It is a difficult environment right now,'' said MBNA's CEO Bruce Hammonds.

The restructuring costs stem from the company's previously announced plan to reduce overhead by offering early retirement to its workers. But the restructuring program is costing MBNA far more than it had anticipated, because more of the company's employees are opting for early retirement than projected.

That wasn't the only surprise the company experienced in the quarter.

MBNA said its earnings were "impacted by unexpectedly high payment volumes'' from its U.S. customers. The move by customers to pay down their credit card bills, particularly on high-interest-rate cards, reduced the dollar value of managed loans in MBNA's portfolios.

Card companies don't make as much money when customers either pay their bills on time or pay down their outstanding credit card debt.

The faster paydowns forced MBNA to revalue its interest-only strips, a type of security it uses as a hedge for its securitization business. The downward revaluation resulted in a $206 million loss in securitization activity, which is why MBNA reported an 8% decline in "other operating income'' compared to a year ago. In the quarter, other operating income totaled $1.78 billion.

MBNA is the second financial institution this week to report valuation problems with so-called IO strips. Puerto Rico-based

Doral Financial

(DRL)

said Tuesday it might restate earnings by as much as $600 million because of continuing problems with its use of IO strips, which the bank uses to hedge its mortgage portfolio and record gains on sales of mortgages.

On Wednesday, Doral announced the

Securities and Exchange Commission

had opened an informal investigation into the matter.