Citigroup Inc. sold its Sony Corp. credit card portfolio, which has $1.5 billion of receivables, to Bank One Corp. in July, the companies have acknowledged.
The transfer points to diverging strategies in cobranding between the two major issuers, some experts say. Citi, which has recently picked up deals with Home Depot Inc. and Sears, Roebuck and Co., has said it intends to do heavy promotions for the select retailers with which it does business.
Bank One, on the other hand, seems eager to highlight the breadth and diversity of its cobrand and affinity products, not just its splashy deals with such companies as Starbucks Coffee Co. and Walt Disney Co.
Citi's third-quarter earnings announcement Monday slipped in the fact that it had lost a renewal bid to manage its 5-year-old Sony credit card cobrand. In addition to losing the rights to market new cards for the Tokyo entertainment conglomerate, Citi sold the loans to the new issuer, Bank One.
The companies declined to discuss the arrangements in detail. But on Monday, in response to an analyst's question about lower-than-expected receivables growth, Citi chief financial officer Todd Thomson acknowledged that the sale of its Sony card receivables was a factor, in addition to its pullback on teaser 0% interest rate offers.
"We had a cobrand card with Sony. They ran a competition that we competed for and [Sony] gave the business to another competitor," Mr. Thomson said. Citi's sale of its existing receivables to the winning bidder, which Citi was careful not to name, is consistent with the industrywide practice in such cases, he said.
Though Bank One did not announce the Sony contract in posting its third-quarter results Tuesday, a spokesman for the Chicago company acknowledged the deal. "Bank One and a subsidiary of Sony Corporation of America have entered into a relationship. We are currently working out details and will have more to say in the coming months," spokesman David J. Chamberlin wrote in an e-mail message Monday.
A Bank One Sony card has not yet been announced, but a Sony spokeswoman said she expected a product introduction in early 2004. Citi's contract expired in June, she said. By June 16, she said, the portfolio was in transition to Bank One. Cardholders were promptly notified.
Sony would not say why it switched issuers, but in an earnings statement for its first quarter, which ended June 30, it posted a $64 million advance payment for licensing rights on Sony-branded credit cards. Though Sony did not name the source of the money, apparently it was Bank One.
Chris X. Moloney, the director of market development and strategy for Maritz Inc.'s loyalty marketing division, said the premium that Bank One paid for the Sony receivables probably made it attractive for Citi to hand them over.
The switch might also depict two differing cobrand strategies, in which Bank One emphasizes its multiplicity of products and Citi leans hard on a few big brand names, Mr. Moloney said. He said that he personally does not work with Citi or Bank One, though both are clients of Maritz, which is based in St. Louis.
Recent television ads for Bank One's credit cards stress the variety of cards available. One new spot that has appeared throughout baseball's World Series showcases several cobranded Bank One cards, including ones with Yahoo Inc., Borders Inc., and British Airways.
Mr. Moloney said the idea is to lift the Bank One brand and that recognition of the bank's name could outlast any of its cobrand contracts. "Even if the Sony deal were to expire five years down the road," for instance, "those customers would still identify with Bank One," he said.
Last week Bank One unveiled its Starbucks Duetto Visa, which is both a general-purpose credit card and a reloadable, prepaid Starbucks card. The bank's third-quarter earnings release highlighted Bank One's new agreements with Trump Hotels and Casino Resorts, FedEx Corp., AARP, and BellSouth Corp.
Citi, on the other hand, seems to be consolidating its cobrand portfolio, homing in on big brands like Home Depot and Sears, Mr. Moloney said.
Bank One's card services division on Tuesday reported that it had third-quarter net income of $285 million, 4% less than a year earlier. It added $6.1 billion of new card receivables, bringing total managed card loans to $74.3 billion.
Citi's managed receivables rose 5%, to $131 billion. Mr. Thomson said the $6.3 billion of Home Depot loans acquired in July offset the reduction in accounts originated from teaser rates and the sale of the Sony receivables.
