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
-- 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
-- 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.
-- 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
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.
Kevin Dove, Head of External Communications at
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
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