CIBC in talks with TD Bank to keep half Aeroplan portfolio

Mon Aug 12, 2013 2:03pm EDT
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By Cameron French

TORONTO (Reuters) - Canadian Imperial Bank of Commerce (CM.TO: Quote) is in talks to retain about half of its Aeroplan credit card portfolio after Toronto-Dominion Bank (TD.TO: Quote) 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 (AIM.TO: Quote), 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 Friday.

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 August 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 ACb.TO, 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.   Continued...

A pedestrian walks past a CIBC branch in Montreal, February 25, 2010. REUTERS/Christinne Muschi