The Toronto-Dominion Bank (TD), Canada’s second largest bank, declared its entry into a 10-year definitive agreement with Aimia Inc. (GAPFF), wherein TD Bank would become the key issuer of credit cards for Aeroplan, a loyalty program owned by the latter. The deal will take effect on January 1, 2014.
As per the agreement, TD Bank would offer a full suite of co-branded Aeroplan Visa credit cards to its customers that would give them various options to earn air miles. Moreover, the customers would be able to enjoy other features and advantages of the Aeroplan program that includes the benefits from Aeroplan’s new Distinction recognition program – to be launched in January 2014. Under this program, customers would be able to select any of the enhanced premium and mid-market co-branded Aeroplan credit cards. Further, each plan would provide distinct benefits and earn rates.
Additionally, it is anticipated that the new co-branded credit cards would include credit cards for U.S. residents as well as credit cards for small business owners in Canada.
Earlier in June, TD Bank had announced that it would replace Canadian Imperial Bank of Commerce “CIBC” (CM) as the issuer of the Aerogold card. However, CIBC and Aimia failed to reach an agreement to extend their 22-year partnership.
CIBC proposes to sell 50% of its Aerogold portfolio to TD Bank and intends to retain those Aerogold credit card accounts held by its customers who have a broader banking relationship with the bank. Moreover, CIBC intends to issue Aerogold cards to these customers for a minimum period of 10 years.
CIBC intends to legally challenge TD Bank’s deal with Aimia if it fails to reach an agreement with TD Bank by August 26. As per CIBC, TD Bank’s deal with Aimia is invalid since it does not conform to Aimia’s obligations toward CIBC, under the current credit card agreement, expiring on December 31, 2013. The agreement between CIBC and Aimia invalidates the first refusal right of the former and its ability to match.
TD Bank has been constantly expanding its credit card business. Earlier, in 2011, it purchased the MBNA Canadian credit card business from Bank of America Corporation (BAC).
The TD Bank-Aimia deal is expected to be accretive to the top line of the former. Moreover, TD Bank anticipates the agreement to have a material impact on its 2015 earnings.
TD Bank currently carries a Zacks Rank #3 (Hold).
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