UPDATE 3-Target to sell credit card portfolio to TD Bank
Oct 23 (Reuters) - Target Corp agreed to sell its credit card portfolio to Toronto-Dominion Bank , nearly two years after the U.S. discount retailer said it wanted to unload the business.
TD will pay an amount equal to the gross value of the outstanding receivables - most recently valued at $5.9 billion - when the deal closes, and signed a 7-year agreement to be the exclusive issuer of Target-branded Visa and private-label cards in the United States.
The deal gives Toronto-based TD, the sixth-largest bank in North America, a way to expand its credit card portfolio and allows Target to cut debt as it expands retail operations, including its first foray into Canada, planned for early next year.
Target's credit card business has been growing as the chain offers 5 percent discounts for users of the so-called REDcard and free shipping for online orders.
In the second quarter, the percentage of sales in Target stores paid with Target's REDcard credit and debit cards rose to 12.8 percent from 8.7 percent a year earlier.
"This is a pretty high-quality portfolio," said Tom Lewandowski, a St. Louis-based banking analyst at Edward Jones.
Canada's banks escaped the 2008 financial crisis in relatively strong shape and have been seeking foreign-owned assets to offset meager growth prospects in their home market.
Separately, TD's larger rival Royal Bank of Canada said on Tuesday it agreed to buy the Canadian auto finance and deposit arm of Ally Financial. TD was also involved in the bidding for Ally, a source told Reuters. Continued...