(Toronto) CIBC has signed an agreement to acquire retailer Costco's credit card portfolio in Canada and become the exclusive issuer of Costco Mastercard cards in the country as part of a campaign to expand its credit card portfolio credit.
The bank did not disclose the financial details of the deal but said the portfolio included millions of credit cards with more than $3 billion in outstanding balances.
The deal will help CIBC expand its offering for cards that don't offer travel rewards and should help attract Costco cardholders to other CIBC products, the group leader for cardholders said Thursday. personal and commercial banking services, Laura Dottori-Attanasio, in a statement Thursday.
“This relationship allows us to diversify our portfolio of rewards credit cards on everyday purchases and to carve out a better market share in the payments sector, in addition to deepening our relationships in concrete ways by meeting the financial needs of Costco members. ”
“We are committed to providing them with an excellent customer experience and winning over their business more with our expert advice and best-in-class solutions to help them turn their ideas into reality. »
The bank says Capital One Costco Mastercard cardholders can continue to use their current card until they receive their new CIBC Costco Mastercard, which is expected to happen early next year. The bank said it would clarify details of the rewards associated with the new card in the coming months.
The new CIBC Costco Mastercard will offer rewards for purchases at more than 100 Costco warehouses in Canada and on the Costco.ca website. It will also act as a Costco membership card.
The deal adds a Mastercard offering to CIBC's Visa card portfolio, which includes its Aventura and Aeroplan traveler rewards cards and its Dividend cash back card.
Speaking on an investor call last week, the bank's chief executive, Victor Dodig, stressed the importance of the bank having a balanced card portfolio.
“As the economy continues to return to normal, our goal is to ensure we have a strong presence in both travel and non-travel cards to gain market share as consumer spending will increase. »
Scotiabank analyst Meny Grauman said in a note that adding a portfolio of this size in a mature market was certainly a positive for CIBC, although questions remain about the profitability of the deal, given Costco's reputation for negotiating hard.
“The real payoff here for CIBC will be the cross-selling opportunities to millions of affluent cardholders, only a small portion of whom are current CIBC customers. »
The deal will increase CIBC's total card balances by approximately 30% to more than $13 billion, cementing its position as third in Canada for outstanding balances and purchase volumes, Grauman added.
Banks saw credit card transactions increase as spending increased, but card balances remained lower as more consumers pay off their balances.
Statistics Canada reported last week that Canadians paid off $16.6 billion in credit card debt in the first year of the pandemic, reducing the total outstanding balance to $74 billion in January 2021.
This 18.3% reduction marked a sharp reversal of the trend of the past 20 years, which saw credit card balances increase by an average of 20.7% per year to reach a high of 90.6 billion in February 2020.
