CIBC to buy Canadian Mastercard portfolio from Citigroup

TORONTO – CIBC has signed a deal to buy a $2.1-billion credit card portfolio from Citigroup’s Canadian MasterCard business, a transaction which makes the big bank Canada’s largest issuer of Visa and MasterCard credit cards.

The portfolio includes accounts associated with co-branded Petro Canada credit cards that offer the Petro Points rewards program.

“This acquisition is directly aligned with our strategy to grow our core Canadian operations,” CIBC president and chief executive Gerry McCaughey said in a statement after stock markets closed Monday.

“With our scale, platform and operating synergies, combined with our expertise in credit cards, we are confident this transaction furthers our strategic growth objectives.”

CIBC had more than $14-billion in outstanding credit card balances at the end of April, the bank’s fiscal second quarter. Monday’s transaction will make the bank the largest dual credit card issuer in Canada.

The deal is also expected to add to CIBC’s earnings during the first year following its closing, the bank said. Terms of the deal, set to close in October, were not disclosed.

CIBC is one of Canada’s biggest banks, with a country-wide retail banking network as well as its credit card and mortgage businesses.

Citibank is part of the Citigroup global financial services giant, which has been shedding some of its operations in the wake of the Wall Street financial meltdown.

Under the agreement, prior to closing, non-performing accounts will be removed from the acquired portfolio and from Broadway Credit Card Trust, which has securitized certain Citibank MasterCard receivables.

CIBC said it was its third transaction since early March including the acquisition of the remaining 50 per cent of CIT Business Credit Canada and the purchase of a minority stake in Bermuda-based the Bank of N.T. Butterfield & Son Ltd.

“We have had these transactions on our target list for an extended period of time,” said McCaughey.

“We are very pleased that we have been able to realize all three in such a short period and believe that they will add to our franchise given their linkages and connectivity to our core businesses.”

Citigroup CEO Vikram Pandit said Monday that shedding the Canadian MasterCard business is part of the bank’s plan to divest non-core assets and Citi will now focus on growing its other banking operations.

“Citi remains committed to delivering on its global strategy in Canada, which includes a focus on the growth of our core businesses,” he said.

“Our team continues to pursue opportunities to reduce assets in Citi Holdings in a way that will create value for our stakeholders.”

Earlier this month, Citigroup announced it was closing 330 branches of its U.S. consumer finance business as part of its restructuring, resulting in about 500 to 600 job cuts.

Pandit said earlier this year that the bank would continue selling off Citi Holdings, which had $547-billion worth of assets at the end of 2009.

Citigroup received $45-billion in government bailout money at the height of the financial crisis. It raised $20-billion in December to help repay the money it received as part of the Troubled Asset Relief Program. The remaining $25-billion was converted to stock last fall, giving the U.S. government what is now a 22 per cent ownership stake.

CIBC shares rose 89 cents to $72.69 Monday on the Toronto Stock Exchange.

On the New York Stock Exchange, Citibank shares closed unchanged at US$3.88.

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