TD Bank Group Acquires Bank of America Canadian Credit Card Portfolio

TD Bank Group (TD) and the Bank of America Corporation has announced a definitive agreement in which TD will be purchasing MBNA Canada’s credit card portfolio, and a few other assets and liabilities.

This transaction will cost TD a modest premium on top of the expected $8.5 billion of credit card receivables at closing.

This agreement comes in at a time where Canadian households are drowning in more debt than ever before.

What does this acquisition mean for TD?

With this acquisition, TD will come into possession of around $8.5 billion in outstanding balances from about 1.8 million active credit card accounts. These assets are part of the MBNA credit card portfolio, which was acquired by the Bank of America.

The most important part of this acquisition is the fact that TD will now hold both a Visa portfolio and a MasterCard portfolio. In 2000, when TD merged with Canada Trust, they were forced to sell off their MasterCard assets as during that period banks were not permitted to offer both Visa and MasterCard products to clients. This is not the case anymore. The rules now permit it, and in fact several banks offer both Visa and MasterCard, such as RBC offering the WestJet RBC World MasterCard.

Ed Clark, Group President and CEO, TD Bank Group explained how pleased they are with acquiring MBNA’s Canada’s credit card business. He noted that this acquisition will now place TD in the position as the top card issuer in Canada.

MBNA Canada is the country’s largest MasterCard issuer. This acquisition will allow TD to significantly build their existing credit card business. As it stands, TD currently holds 4 million active account, and now they will hold 5.8 million accounts.

What can we expect in the future from TD?

One thing we can all expect to see in the future are seeing TD offer MasterCard credit cards. By acquiring the MBNA Canadian credit card business, TD has become a dual issuer, giving customers greater choice when selecting their credit card.

As it stands, the Bank of America offers one of the best cash back credit cards on the market. The MBNA Smart Cash Platinum Plus credit card offers 3% cash back on all of your gas and grocery and 5% for the first 6 months.

With that said, I could see TD adopt this kind of cash back program, allowing them to compete with Scotiabank who currently released the Scotia Momentum Visa Infinite, which is definitely one of the top cash back credit cards currently on the market.

I for one cannot wait to see what TD brings out in the future. Hopefully it lives up to the expectations I am sure we all share.