TORONTO, Sept. 16, 2013 /CNW/ - CIBC (TSX: CM) (NYSE: CM) announced today it has reached tri-party agreements
with Aimia and TD Bank Group.
Under the terms of the 10-year agreement with Aimia, CIBC will continue
to be an issuer of Aeroplan related travel credit cards. This agreement
ensures that CIBC Aerogold VISA clients will continue to earn Aeroplan
miles as usual and will benefit from the enhanced Aeroplan program
starting January 2014.
CIBC will sell approximately 50 per cent of its existing Aerogold VISA
portfolio to TD, consisting primarily of credit card only customers.
Consistent with its strategy to invest in and deepen client
relationships, CIBC will retain the Aerogold VISA credit card accounts
held by clients with broader banking relationships at CIBC.
Key Financial Terms
The portfolio being divested by CIBC consists of approximately $3
billion of credit card receivables. Upon closing, CIBC will receive a
cash payment from TD that will be equal to the approximately $3 billion
in credit card receivables outstanding being acquired by TD.
CIBC will also receive upon closing, in aggregate $200 million in
upfront payments from TD and Aimia as well as annual payments from TD
of approximately $37.5 million per year in each of the 3 years after
closing.
In addition to these amounts, CIBC will release approximately $65
million of loan loss provisions related to the sold portfolio, and
incur approximately $55 million in costs, $25 million on closing and
$30 million over the next four quarters. The net income of the upfront
payments, loan loss release and closing costs is expected to be
approximately $180 million.
CIBC will also free up approximately $280 million of regulatory capital
related to the reduction of credit card receivables.
Based on current levels of profitability, the annual earnings impact of
the agreements being announced today is a reduction of approximately
$0.45 per share on an ongoing basis.
Separate from the tri-party agreements announced today, CIBC will also
continue with its plans to introduce an enhanced proprietary travel
loyalty rewards card. As previously disclosed, CIBC will spend
approximately $50 million related to this launch, of which
approximately $30 million will be in fiscal 2013 and the remainder will
be spent in 2014.
Key Agreement Terms
Under the terms of this agreement:
-
CIBC will continue to have rights to market the Aeroplan program and
originate new Aerogold cardholders through its CIBC branded channels.
-
The parties have agreed to certain provisions to compensate for the risk
of cardholder migration from one party to another. There is potential
for payments of up to $400 million by TD/Aimia or CIBC for migration of
Aeroplan credit card accounts.
-
The CIBC and Aimia agreement includes an option for either party to
terminate the agreement after the third year and penalty payments due
from CIBC to Aimia if holders of Aeroplan credit cards from CIBC's
retained portfolio switch to other CIBC credit cards above certain
thresholds.
-
CIBC will work with TD under an interim servicing agreement to effect a
smooth transition of the customers moving to TD.
Legal and Closing Conditions
-
The closing, which is expected to occur in December 2013, is subject to
customary closing conditions, including receipt of necessary regulatory
approvals.
-
In conjunction with the agreement being announced today, CIBC has also
agreed that, upon closing of the transactions contemplated by the
purchase agreement, CIBC will fully release Aimia and TD from any
potential claims in connection with TD becoming Aeroplan's primary
financial credit card partner.
Investor Teleconference
-
CIBC will host an analyst and investor conference call at 8:45 am ET
today to discuss this matter. The conference call will be available in
English (416-340-2217 in Toronto, or toll-free 1-866-696-5910, passcode
4503914#) and French (514-861-2255, or toll-free 1-877-405-9213,
passcode 9368461#). Participants are asked to dial in 10 minutes
before the call. Immediately following the prepared comments, CIBC
executives will be available to answer questions.
A NOTE ABOUT FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the
meaning of securities laws in Canada and the United States. These
statements include, but are not limited to, statements about closing
conditions, requirement for regulatory approval, our operations, cards
business, financial condition, annual earnings impact, risk management,
ongoing objectives, strategies and outlook. Forward-looking statements
are subject to inherent risks and uncertainties that may be general or
specific. A variety of factors, many of which are beyond our control,
could cause actual results to differ materially from the expectations
expressed in any of our forward-looking statements including, higher
than anticipated costs to launch an enhanced proprietary travel card;
lower than anticipated [interchange rates and] card usage; industry
competition; [changes in network rules]; credit and market risks;
changes in market rates and prices; and our ability to anticipate and
manage the risks associated with these factors. We do not undertake to
update any forward-looking statement except as required by law.
About CIBC
CIBC is a leading North American financial institution with more than 11
million personal banking and business clients. CIBC offers a full range
of products and services through its comprehensive electronic banking
network, branches and offices across Canada, and has offices in the
United States and around the world. You can find other news releases
and information about CIBC in our Media Centre on our corporate website
at www.cibc.com.
SOURCE CIBC
Image with caption: "Ed Clark, Group President and CEO, TD Bank Group; Rupert Duchesne, Group Chief Executive, Aimia; and Gerry McCaughey, President and CEO, CIBC; announce the confirmed agreements between TD, Aimia and CIBC regarding Aeroplan-branded Visa credit cards. (CNW Group/CIBC)". Image available at: http://photos.newswire.ca/images/download/20130916_C7134_PHOTO_EN_30870.jpg
