In an effort to extend its offerings,
Royal Bank of Canada
) plans to acquire the Shoppers Optimum MasterCard credit card
Bank of America Corp.
). The announcement comes with the launch of the co-branded
MasterCard offered by Royal Bank of Canada ("RBC") and Shoppers
Drug Mart Corporation, a leading pharmacy chain in Canada.
BANK OF AMER CP (BAC): Free Stock Analysis
ROYAL BANK CDA (RY): Free Stock Analysis Report
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The co-branded card, RBC Shoppers Optimum MasterCard, further
consolidates RBC's alliance with Shoppers and complements the RBC
Shoppers Optimum banking account and debit card.
Financial terms of the deal for the purchase of the credit card
portfolio were not made public. It is subject to customary
regulatory approvals as well as other conditions and is anticipated
to be accomplished later this fall.
Following the closure of the deal, RBC intends to move the existing
Shoppers Optimum MasterCard credit cards into the RBC Shoppers
Optimum MasterCard credit card program. With no annual fees and the
option of earning reward points for procurement, the co-branded
card is expected to garner popularity and strengthen the customer
The deal is a strategic fit for RBC. It will not only help increase
its MasterCard product offerings, but also bolster its customer
base and facilitate revenue generation amidst the stressed
conditions in their lending business.
On the other hand, Bank of America has been involved in
restructuring its business and has made several asset sales in the
past few years as part of its effort to rebound from the financial
crisis and build up its capital levels. As a matter of fact, last
year, the company vended its Canadian consumer credit card business
to Toronto-Dominion Bank. Also, for Shoppers Drug Mart, the deal
will help increase the financial flexibility of its customers and
add to its competitive edge.
The shares of RBC retain a Zacks #2 Rank, which translates into a
short-term Buy rating.