RBC Expects to Win Card Defectors If CIBC Loses Aimia Agreement

Royal Bank of Canada (RY) expects to gain more credit-card customers if Canadian Imperial Bank of Commerce loses its card partnership with loyalty rewards operator Aimia Inc. (AIM) to Toronto-Dominion (TD) Bank.

Canadian Imperial has until tomorrow to match the terms of an agreement Toronto-Dominion made to become the primary card issuer for Aimia’s Aeroplan rewards program if it wants to keep its 22-year partnership. Toronto-Dominion conditionally agreed on June 27 to become Aimia’s partner starting Jan. 1.

“This market turmoil creates opportunities, it wakes people up,” Linda Mantia, executive vice president of cards and payment solutions at Toronto-based Royal Bank, said today in an interview. “There’s a great opportunity for us to continue the growth momentum that we have” with our reward cards.

Royal Bank introduced the RBC Avion travel card program in 1999 and has since attracted more than a million customers. The lender said it expects any change in Aimia’s partnership will prompt cardholders to weigh alternatives.

Ali Duncan Martin, a Toronto-Dominion spokeswoman, declined to comment, as did Canadian Imperial’s Kevin Dove.

Royal Bank was Canada’s third-largest credit-card issuer last year based on outstanding balances, according to an April issue of the Nilson Report, an industry publication. Canadian Imperial was the largest, followed by Toronto-Dominion.

Canadian Imperial will probably opt out of its agreement with Aimia, leading Toronto-Dominion to take over the partnership, said John Aiken, a Barclays Plc analyst in Toronto.

“Given CIBC’s public statements, we do not believe it will exercise its right, and could potentially seek damages through the courts,” Aiken said yesterday in a note to clients. “With a deal unlikely, expect earnings and valuation to come down heading into Q3.”

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Christine Harper at charper@bloomberg.net

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