Citi Inks Deal with Best Buy - Analyst Blog
February 20 2013 - 7:40AM
Zacks
Citigroup Inc. (C) declared that it has entered
into a strategic agreement with Best Buy Co., Inc.
(BBY) 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
Mastercard Incorporated’s (MA) cards bearing Best
Buy’s symbol, which can be used for all purchases.
Additionally, Citi inked a deal with Capital One Financial
Corp. (COF) 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).
BEST BUY (BBY): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
CAPITAL ONE FIN (COF): Free Stock Analysis Report
MASTERCARD INC (MA): Free Stock Analysis Report
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