Bank One Corp. said Thursday that it had sold its Canadian card business to Royal Bank of Canada.
The transaction came two months after Morgan Stanley Dean Witter & Co.'s deal to buy Bank One's card businesses in Canada and the United Kingdom fell through. A signed agreement was rescinded in March because of Visa International bylaws that restrict the issuer of the Discover card from issuing Visa cards as well, according to Morgan Stanley.
Royal Bank, which has about $3.34 billion of credit card receivables, said the deal would add a little less than 10% to its portfolio size. Analysts estimated Bank One's card receivables in Canada at about $287 million.
Toronto-based Royal Bank said the deal makes it the foremost affinity card marketer in Canada. Royal Bank has about 30 affinity relationships, and Bank One had nearly 30 as well.
"This gives us the clear lead on the affinity market," said Mark Tonnesen, executive vice president of card services and point of sale at Royal Bank. "We saw this acquisition as a great opportunity to further strengthen our cardholder base."
Mr. Tonnesen would not disclose the terms of the deal but said Royal Bank paid a price that is "reasonable in the context of the premiums you've seen on portfolios lately."
Bank One, which has had problems lately with its credit card business, First USA, has been looking to unload its foreign card operations in an effort to focus on its domestic business. Bank One would not comment on the possibility of selling its U.K. card business, but analysts said it would most likely go next, given that a deal had already been made with Morgan Stanley.
The Canadian card deal is the first business unit sale Bank One has made under James Dimon, the former president of Citigroup, who is Bank One's new chairman and chief executive officer. Mr. Dimon was tapped to turn around the fifth-largest U.S. banking company after it was forced since August to issue four profit warnings, mostly because of customer attrition at First USA.
William P. Boardman, vice chairman and head of credit cards at Bank One, has said that the credit card markets in Canada and the United Kingdom turned out to be more competitive than was expected.
"As part of our corporation-wide strategic review, we are evaluating all of our businesses and have decided to exit the credit card business in Canada," Mr. Boardman said in a statement.
"This is just part of their focus on their core business and turning the ship around," said Michael Auriemma, president of Auriemma Consulting Group in Westbury, N.Y. "I would suspect the U.K. is not far behind."
Chicago-based Bank One started issuing credit cards in Canada in late 1998. Royal Bank said it would take over a Bank One facility in Ottawa and the 200 employees there.
