CIBC has agreed to take over Costco’s Canadian credit card business, as major Canadian banks search for more sources of revenue amid a decline in consumer borrowing during the Covid-19 pandemic.
According to a statement from CIBC seen by Bloomberg, the bank will purchase Costco’s portfolio of Capital One Mastercards, which have a combined total of $3 billion in outstanding balances. Although the terms of the deal were not disclosed, the change is expected to come into effect early next year.
The latest move comes as major Canadian banks look for more income streams due to low revenues from credit card balances. Canadians’ spending habits significantly shifted during the Covid-19 pandemic, as consumers refrained from taking on significant loans, especially credit card debt. Meanwhile, an increasing number of consumers are reverting to other payment programs for large purchases, such as services allowing them to divide their payments into smaller instalments.
Despite the reopening of the economy and the resumption of indoor dining and increased demand for travel and leisure shopping, Canada’s big six banks have yet to note a rebound in credit card activity to pre-pandemic levels.
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