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Citigroup Inc.'s $2.1 billion acquisition of Wachovia Corp. could be a boon for its card-issuing business, analysts say. The deal provides Citi with a small, but robust, credit card portfolio and a growing debit card portfolio from Wachovia, but it also provides a much-needed boost in prime retail bank locations in key markets where it lacked a strong presence. Citi's ability to add 3,300 Wachovia branches in many new markets comes as retail outlets are becoming crucial to winning new credit and debit card customers. "Citi's rivals, particularly Bank of America and Chase, in recent quarters have boasted higher numbers of credit and debit card customers acquired through cross-marketing channels on the retail side and Citi was lagging in this area," Scott Strumello, an associate with Westbury, N.Y.-based Auriemma Consulting Group, tells CardLine. "Wachovia has an enviable network of bank branches in good locations, which should provide an instant opportunity for Citi to reach into new markets." The deal also dovetails with Citi's efforts to broaden marketing for its relationship-based ThankYou Network, which includes rewarding retail bank customers for each credit and debit card transaction they make, he says. Wachovia re-entered the credit card-issuing business in July 2006 after BofA acquired MBNA Corp. MBNA had issued Wachovia's credit cards. The bank used a $100 million break-up fee from MBNA to launch its own card program, and the portfolio has posted healthy growth in recent quarters, almost entirely by cross-selling card services through its branches. "While Citi has struggled with rising card delinquencies and charge-offs like many other issuers, its card unit has been churning out profits," Strumello says. Adding Wachovia's card assets to the mix could be a great opportunity for Citi, especially under the fresh leadership of (Citi CEO) Vikram Pandit."
