UPDATE 1-CIBC card deal could see sale of C$3 bln of receivables

Thu Aug 29, 2013 2:03pm EDT

* In talks to sell half of Aeroplan portfolio

* Aeroplan card contributed C$0.95/share in past year

* Bank profit topped estimates, shares rise

By Cameron French

TORONTO, Aug 29 (Reuters) - Canadian Imperial Bank of Commerce will part with around C$3 billion ($2.85 billion) of credit card receivables if its deal to sell half of its Aeroplan Visa credit card portfolio with Toronto-Dominion Bank goes through.

Speaking on a conference call to discuss the bank's third-quarter results, Chief Financial Officer Kevin Glass said on Thursday that the Aeroplan portfolio currently accounts for about C$6 billion in outstanding receivables.

He also said the card had produced 95 Canadian cents per share of profit over the 12 months ended July 31. That amounts to about 12 percent of the bank's total profit over that period.

CIBC has in the past refused to break out the profit contribution of its credit cards, but made the disclosure as it negotiates a deal with TD that would see the two banks split the portfolio about down the middle, with CIBC retaining clients with which it has other banking relationships.

For the fiscal third quarter, Toronto-based CIBC earned C$890 million ($848.75 million), or C$2.16 a share. That compared with a profit of C$841 million, or C$2.00 a share, in the year-before period.

Excluding items such as a C$28 million loss related to flooding in the province of Alberta over the summer, the bank earned C$2.29 a share. Analysts on average had expected C$2.15 a share, according to Thomson Reuters I/B/E/S.

The result, driven by stronger domestic lending and wealth management income, drove the bank's shares up 2.5 percent, and mirrored similarly strong results by rivals TD and Royal Bank of Canada.

CIBC has been the main issuer of the Aeroplan card for 22 years, but lost that role this year after Aimia Inc, which owns the Aeroplan flight rewards program, could not come to terms on an extension with CIBC and instead entered into a partnership with TD.

CIBC had a right to match the terms of TD's deal, but instead the two banks announced earlier this month they were negotiating a deal for CIBC to sell half of its Aeroplan portfolio to TD for an undisclosed sum.

"I don't think it's good news for CIBC to be potentially losing this business, but it could be manageable if they do get a decent premium and they use it to invest in other businesses or buy back more shares," said Peter Routledge, an analyst at National Bank Financial.

CIBC and TD were the largest card issuers in Canada last year, and the Aeroplan card has long been CIBC most profitable card.

In addition to the talks to sell half of Aeroplan, CIBC says it is working on an alternative travel card that it plans to release in the next few months.

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