Even if Canadian Imperial Bank of Commerce cuts a three-way deal with Toronto-Dominion Bank and Aimia Inc., the parent company of Aeroplan, the bank still plans on launching a brand new travel card.
CIBC first floated the idea in May on a call with analysts, when the bank very publicly threatened to end its relationship with Aeroplan and went so far as to say it was ready to spend $50-million to market a new travel card.
But after CIBC and TD announced a potential compromise between themselves and Aimia a few weeks ago, one in which both banks would become Aeroplan card providers come 2014, no one was quite sure whether CIBC would still venture out with its own card. (The bank already has a separate travel card, the Aventura; the new offering was supposed to be bigger and better.)
Some clarity came Thursday. After chief financial officer Kevin Glass said early into a conference call with analysts that it would be "inappropriate to comment" on the credit card strategy because talks with TD and CIBC are ongoing, David Williamson, the head of Canadian retail, said a little while later that CIBC is "going to be launching an enhanced travel card that will be released over the coming months."
What exactly this card will offer is still unknown, but the common thinking in the industry is that it will be more in line with RBC's Avion travel rewards card, which lets its users redeem their points on any flight.
CIBC also took the major step Thursday to disclose just how much it makes from its current Aeroplan cardholders – something that was never detailed before, leaving analysts to make their best guesses.
The bank's Aeroplan credit card receivables total roughly $6-billion, and in the past year they accounted for 95 cents of earnings per share, or 11 per cent of the bank's total earnings. That figure falls into the 5- to 15-per-cent range many analysts estimated.
CIBC also offered some colour on the extent to which an Aeroplan sale would impact its net interest margin, or the spread it makes between the rate it borrows at and the rate it lends. Credit cards are a high margin product because their interest rates are typically in the high teens or above 20 per cent.
Each billion dollars of Aeroplan receivables adds three basis points to the margin, or 0.03 per cent. If half of the $6-billion portfolio is sold off, it could hurt the bank's net interest margin by roughly nine or 10 basis points.
(Tim Kiladze is a Globe and Mail Capital Markets Reporter.)
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