Canadian Imperial (CM) to operate Costco’s card business in Canada
In order to diversify its portfolio in the space of daily rewards, Canadian Imperial Bank of Commerce CM, commonly known as CIBC, is preparing to acquire Wholesale company CostcoCOST’s existing portfolio of Canadian co-branded credit cards. Costco’s credit card portfolio in Canada has over $ 3 billion in its outstanding balances. Financial terms of the deal were not disclosed.
CIBC shares edged up after the acquisition was announced, sparking investor optimism about the deal.
Capital One Financial Corporation COF, the current issuer of the Costco-branded credit card in Canada, is entering into an alliance with the retail giant.
Mastercard will remain the exclusive payment network for the Costco co-branded credit card in Canada and will also be accepted at Costco warehouses nationwide.
CIBC and Costco have also signed a long-term agreement that makes the first exclusive issuer of the new Costco Mastercard cards in Canada. The transaction is expected to close in early 2022, subject to customary closing conditions. Subsequently, the bank will begin issuing the new CIBC Costco Mastercard to the reformed wallet and accept new applications, both online and at Costco Canada warehouses.
The new CIBC Costco Mastercard will offer great rewards for purchases at all Canadian Costco warehouses and on Costco.ca. That aside, it will serve as a Costco membership card. It can be used in stores around the world that accept Mastercard. Current Capital One Costco Mastercard holders can continue to use their card until they receive their new CIBC Costco Mastercard. Cash back coupons will be mailed to eligible cardholders in January 2022.
The deal comes as no surprise, as CIBC CEO Victor Dodig said during the company’s August 2021 earnings call, which the lender intended to invest in non-travel cards to exploit increased consumer spending at the end of the pandemic. This acquisition will allow the Toronto bank to expand its credit portfolio and attract customers from Costco’s large membership base to its Canadian retail banking franchise. This will likely increase its market share in the payments space.
Pierre Riel, Senior National Executive Vice President, Costco Canada, said, “Our CIBC members and clients expect us to provide them with payment options that meet their needs. With enhanced offerings, such as cutting-edge digital capabilities, robust features, and bigger rewards, our members will have even more ways to get the most out of their membership. “
Laura Dottori-Attanasio, Group Head, Personal and Commercial Banking at CIBC, said: “This investment builds on the positive momentum we have established as we execute our strategy, build deep and lasting relationships with our clients. customers and develop our business. . We look forward to welcoming Costco members to CIBC, and we are committed to providing a great customer experience and getting more out of their business through our expert advice and industry-leading solutions as we bring them to life. let’s help achieve their ambitions. “
Shares of this company currently Zacks Rank # 3 (Hold) have risen 36% so far this year on the NYSE, outperforming the industry’s 15.4% rise. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
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Canadian Imperial has grown in the United States through strategic acquisitions since it purchased Chicago-based PrivateBancorp Inc. in 2017. In the same year, the company acquired Geneva Advisors while in 2019 it acquired took over Cleary Gull and Lowenhaupt Global Advisors. In June 2021, it purchased a minority stake in Chicago-based Loop Capital in order to further expand its presence in US capital markets.
The aforementioned agreements as well as its organic growth efforts continue to support Canadian Imperial’s finances, which are currently under the weight of lower rates. In addition, the company faces stiff competition from other Canadian banks, including The Toronto-Dominion Bank TD, Bank of Montreal and the Royal Bank of Canada among others.
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