Citigroup Inc. agreed to take over the Best Buy Co. credit-card business from Capital One Financial Corp. as Chief Executive Officer Michael Corbat boosts the size of a business he once sought to sell.
The deal allows Citigroup to issue and manage Best Buy cards in the U.S. and gives the New York-based bank a loan portfolio with balances of about $7 billion, according to a statement today from McLean, Virginia-based Capital One. The price wasn’t disclosed. The deal covers Best Buy’s house brand of cards, which can be used only in its stores, as well as MasterCards bearing Best Buy’s name that can be used anywhere.
Citigroup is reversing course by building its store-branded cards business, which was once among assets tagged for sale in the Citi Holdings division that Corbat led until the end of 2011. Former CEO Vikram Pandit moved the unit, also known as Citi Retail Services, out of Citi Holdings earlier that year.
“This will add another premier retail franchise and high-quality card portfolio to Citi Retail Services,” Bill Johnson, head of the unit, said in a Citigroup statement.
Capital One expects “no significant gain or loss” while Citigroup, the third-biggest U.S. bank by assets, said the purchase probably won’t affect profit significantly this year. Best Buy, based in Richfield, Minnesota, is the world’s biggest electronics retailer.
Citigroup’s store-branded cards business services almost 90 million accounts, the bank said in its statement. The unit posted a $1.5 billion profit from continuing operations in 2012, compared with $1.48 billion in the prior year, according to a financial supplement. Revenue slid 4 percent to $6.1 billion.