) declared that it has entered into a strategic agreement with
Best Buy Co., Inc.
) to issue as well as manage cards under the latter's brand in
the U.S. The deal constitutes Best Buy's home brand of cards,
which can be used only in its flagship stores, along with
) cards bearing Best Buy's symbol, which can be used for all
BEST BUY (BBY): Free Stock Analysis Report
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MASTERCARD INC (MA): Free Stock Analysis
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Additionally, Citi inked a deal with
Capital One Financial Corp.
) to acquire roughly $7 billion of Best Buy's private label and
its card loan portfolio. The aforementioned agreements are
expected to be completed in the third quarter of 2013, subject to
customary closing conditions. However, Citi does not expect the
transactions to have a material impact on its 2013 earnings.
Citigroup's cards segment, Citi Retail Services, has returned to
its earlier glory following the financial crisis in 2008. Thus,
the bank turned round from its earlier intention to sale the
assets. In 2011, Former Citigroup CEO Vikram Pandit moved the
Citi Retail Services unit out of Citi Holdings division.
Citi Retail Services offers consumer as well as commercial credit
card products, services, and retail solutions to national and
regional retailers throughout North America. The business serves
roughly 90 million accounts for a number of premier brands. The
unit reported a $1.50 billion profit from continuing operations
in 2012, compared with $1.48 billion in the prior year.
Management at Citi believes that the addition of Best Buy's
leading retail franchise and premium card portfolio to Citi
Retail Services will substantially enhance its strong position in
the U.S. market. Best Buy's leadership position in consumer
electronics, combined with Citi's expertise, would further help
in providing better service to the customers.
We believe that Citi's agreement to issue Best Buy cards and
acquire the loan portfolio from Capital One will result in a rise
in revenues in the Citi Retail Services division.
Currently, Citi carries a Zacks Rank #3 (Hold).