UPDATE 2-TD Bank seeks to replace CIBC as Aeroplan credit card partner

Thu Jun 27, 2013 5:09pm EDT
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* New deal would end CIBC's two-decade partnership with Aimia

* CIBC says offer structure nullifies its right of first refusal

* Aimia rises 10.2 pct, CIBC gains 0.4 pct, TD climbs 0.6 pct

By Cameron French

TORONTO, June 27 (Reuters) - Toronto-Dominion Bank has agreed to replace Canadian Imperial Bank of Commerce as issuer of the popular Aeroplan credit card, a move that could pressure CIBC's bottom line at a time when Canadian banks are struggling to drive profit growth.

Shares of Aimia Inc, which runs the Aeroplan loyalty program, rose more than 10 percent after it announced the proposed 10-year agreement with TD on Thursday. Shares of the two banks rose modestly.

CIBC and Aimia have partnered for 22 years on the profitable "Aerogold" rewards card, which allows customers to accumulate Aeroplan points that can be cashed in for travel on Air Canada and its partner airlines, as well as other goods.

Analysts estimate the card produces more than 10 percent of CIBC's profits. The bank, Canada's fifth-largest, does not disclose financial results from its cards business.

"In the short term, definitely a headwind for earnings for CIBC," said Jeffrey Bradacs, a portfolio manager at Manulife Asset Management, which owns shares of both banks.   Continued...