Canadian Imperial Bank of Commerce (CIBC) has announced that it is broadening its place in the Canadian marketplace through the acquisition of a $2.1 billion credit card portfolio from Citigroup’s Canadian MasterCard business.
With this acquisition, CIBC, which had more than $14 billion in outstanding credit card balances at April 30th, 2010, will become the largest dual credit card issuer in Canada.
Gerry McCaughey, President and CEO of CIBC noted that the acquisition made is directly aligned with the strategy CIBC has to grow their Canadian operations. The acquisition is set to strengthen CIBC’s credit cad business by broadening their client base and diversifying their credit card portfolio.
McCaughey also added that this is the right risk aligned method to grow CIBC’s credit card business in Canada, and to further strengthen the position has Canada’s leading credit card issuer.
This transaction is expected to be accretive to CIBC’s earnings during the first year following its closing. Additionally, prior to closing, non-performing accounts will be removed from the acquired portfolio and from Broadway Credit Card Trust, which has securitized some Citibank MasterCard receivables.
The MasterCard program CIBC is acquiring will include accounts that are associated with co-branded Petro Canada credit cards, which offer the “Petro Points” reward program.
Once the transaction has been completed, CIBC is ready to welcome the new clients, allowing them to see all of the advantages CIBC has to offer when you bank with them.
When the transaction is completed, it will place CIBC as the largest dual credit card issuer of Visa and MasterCard products in Canada, which will now allow CIBC to offer even more choices to their clients.
This transaction will mark the third CIBC has undertaken since early March, which includes the acquisition of the remaining 50% of CIT Business Credit Canada and the purchase of a minority stake in Bermuda based The Bank of N.T. Butterfield & Son Limited.
It has been a couple of months since RBC released its first MasterCard, which made it the first Canadian bank to offer both Visa and MasterCard. With CIBC now entering the dual credit card market as the largest provider, I cannot wait to see what kind of MasterCard they will begin to offer. In a few months we should be able to get an idea of what CIBC will offer.
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