In an effort to raise capital by shedding unwanted assets, Bank of America recently sold off a $700 million portfolio of credit cards to U.S Bank. BOA has now has sold off approximately $1 billion of the credit-card loans they used to issue on the behalf of other financial institutions such as Chrysler and Edward Jones. It is the intention of BOA`s card-issuing division, FIA Card Services, to exit the agent bank credit card business entirely by the end of 2012. However, it plans on continuing to issue other types of cards.
“We decided earlier this year that agent bank card business … wasn`t core to our goal of building deep relationships with consumers,” said Bank of America spokeswoman Betty Riess, as reported by The Star Tribune.
U.S. Bank, which is based in Minneapolis, announced that their Elan Financial Services Unit will be acquisitioning the portfolio. Elan is already comprised of consumer and small business cards from some 28 credit unions, banks and other financial service firms. The BOA deal represents the biggest credit card acquisition made by Elan in 40 years. The specific terms of the deal, including the final purchase price, have not yet been disclosed.
“This is a very nice addition to pick up in one purchase,” said the vice chairman and head of U.S. Bancorp Payment Services Pamela Joseph, according to The Star Tribune.
U.S. Bank is aggressively growing the bank card issuing portion of their business and, as a result, is becoming a leader in that sector. Elan has acquired over 300 card portfolios throughout the past six years. Elan issues co-branded cards on the behalf of smaller credit unions, banks and companies such as Toyota, Kroger and REI. It also provides a myriad of other services including ATM management and debit card processing.
Last year, U.S. Bank`s sales were $20.5 billion, over one quarter of which was comprised of revenue generated from their payments business.