* TD replaces CIBC as issuer of flight rewards card
* CIBC's right to match TD's deal expired on Friday
* CIBC objects to TD's agreement with Aimia
By Cameron French
TORONTO, Aug 12 Canadian Imperial Bank of
Commerce is in talks to retain about half of its
Aeroplan credit card portfolio after Toronto-Dominion Bank
replaced it on Monday as the issuer of the popular
flight rewards card.
TD said in June it would replace CIBC as issuer of the
"Aerogold" card after Aimia Inc, which runs the
Aeroplan loyalty program, and CIBC were unable to agree an
extension of their 22-year partnership.
CIBC's right to match TD's deal with Aimia expired on
CIBC, the smallest of Canada's big five banks, said on
Monday it was in talks to sell about half its Aerogold portfolio
to TD, but that it wants to retain cards held by clients who
have a "broader banking relationship" with the bank. It said it
is seeking to issue Aerogold cards to those customers for at
least 10 years.
If an agreement with TD can't be reached by Aug. 26, CIBC
said it has a right to legally challenge TD's deal with Aimia.
CIBC said Aimia's deal with TD is not valid because it doesn't
comply with Aimia's obligations to CIBC.
Analysts estimate that CIBC earns about 10 percent of its
profit from the Aerogold card, which allows customers to
accumulate Aeroplan points that can be cashed in for goods or
for travel on Air Canada, the country's biggest
airline, and its partner airlines.
Peter Routledge, an analyst at National Bank Financial, said
the deal that CIBC wants with TD would allow it to mitigate what
could otherwise be a sizable product loss for the bank.
"If they wind up getting a pretty good price for the
business they sell to TD and still retain their most valuable
customers, then they'll come out of a difficult situation not
too badly bruised," Routledge said.
CIBC's shares were up 1.9 percent at C$78.40 on Monday,
while TD was up 0.1 percent at C$86.73. Aimia climbed 3.7
percent to C$15.87.
For TD, taking on the Aerogold card will allow it to boost
revenue at a time when Canadian banks are struggling to drive
Canadian banks have faced the double-whammy of slowing loan
growth from a cooling housing sector, as well as low interest
rates, which narrow the margins they make on loans.
TD, Canada's second-largest bank, has been building up its
credit card business. In 2011, it bought the MBNA Canadian
credit card business from Bank of America.
Credit card loans are considered riskier than the mortgages
that make up the bulk of Canadian bank loan books, but they also
boast more lucrative rates.
TD has said taking over the Aeroplan agreement will not have
a material impact on 2014 earnings, but will make a "solid
contribution" to its 2015 results.