CHARLOTTE, N.C./TORONTO Eager to shed assets and rebuild its battered capital base, Bank of America Corp (BAC.N) said on Monday it plans to sell its $8.6 billion Canadian credit card portfolio to TD Bank Group (TD.TO).
The bank also wants to exit its United Kingdom and Ireland card businesses, but has yet to decide whether to sell or wind down those operations, said bank spokesman Jerry Dubrowski.
The sale comes just a week after investors hammered the bank's stock amid fears it may need to raise money by offering new shares to help absorb billions in legal and credit costs stemming from its 2008 purchase of Countrywide Financial Corp.
Bank of America shares have lost roughly half their value so far this year, and dropped 12 percent last week, including a 20 percent fall at the start of the week.
The stock made up some lost ground on Monday, and was last trading up 8.3 percent at $7.79 on the New York Stock exchange. Other bank shares rose too.
The bank said the deal should result in a modest increase in its core capital levels, a sentiment echoed by analysts and investors.
"Each of these sales is a small piece or step, but once they're done, this could add up to a big impact," said Guggenheim Securities LLC analyst Marty Mosby.
Bank of America has lost more than $22 billion in its consumer mortgage division in the last four quarters. It agreed in June to pay $8.5 billion to mortgage securities investors and is fighting numerous lawsuits challenging the settlement and other mortgage issues.
The bank said the sale was not a reaction to analyst estimates over the last week that it would need to raise capital to absorb those losses. It did not disclose the value of the transaction.
Analysts said Bank of America was likely to continue selling similar pieces of its loan portfolio, which have had a small impact on its bottom line, but may still be attractive to outside bidders.
"Selling these types of assets makes the most sense," said Keefe, Bruyette & Woods Inc analyst Jefferson Harralson. "Buyers are looking for these kinds of non real estate-related loans."
Last week, Chief Executive Brian Moynihan told investors the bank has sold 23 businesses and assets over the last six quarters. Those sales have generated $30 billion in proceeds for the bank, according to the bank.
The sales ranged from a large portion of the bank's stake in BlackRock Inc (BLK.N), the world's largest asset manager, to Balboa Insurance, which provides foreclosure insurance.
Earlier this summer, Bank of America sold a $1 billion portfolio, or 500,000 accounts, of its credit card portfolio to Regions Financial Corp (RF.N).
It also agreed to sell its Spanish card business, and sold a small UK business lending portfolio to Barclays (BARC.L).
For TD Bank, the deal will add Canada's fourth largest credit card portfolio to its books. Bank executives project that it will add $8.5 billion in card balances, said TD Canada Trust Chief Executive Tim Hockey.
It also makes TD one of the top two card issuers in Canada, alongside perennial leader Canadian Imperial Bank of Commerce (CM.TO), and gives TD a portfolio of higher-margin loans at a time when consumer lending in Canada is expected to stall.
TD has been a laggard in credit cards since it bought Canada Trust in 2000 and was forced, under rules at the time, to sell Canada Trust's card portfolio.
Barclays Capital analyst John Aiken said the planned acquisition was a good move for TD and "should provide for very strong risk-adjusted returns upon integration".
TD, Canada's second-largest bank, has been on the acquisition trail in the United States following the 2008 financial crisis. It made a string of small retail bank acquisitions in 2009 and 2010, and recently closed a $6.3 billion takeover of auto lender Chrysler Financial.
TD's Toronto-listed shares, which are up 3.5 percent on the year, were last trading 1.3 percent higher at C$76.89, while its New York-listed stock climbed 2.2 percent to $78.20.
(Additional reporting by David Henry in New York and Pav Jordan in Toronto. Editing by Robert MacMillan and Knut Engelmann)