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BofA to exit Canada, Europe credit card business

A Bank of America shareholder walks into the corporate headquarters prior to the start of the annual shareholders meeting in Charlotte
A Bank of America shareholder walks into the corporate headquarters prior to the start of the annual shareholders meeting in Charlotte

By Joe Rauch and Cameron French

CHARLOTTE, N.C./TORONTO (Reuters) - Bank of America Corp plans to sell its credit card business in Canada to TD Bank Group , part of a plan by the largest U.S. bank to shed assets and rebuild its capital base.

The deal with TD Bank covers an $8.6 billion portfolio, Bank of America said on Monday.

The bank also wants to exit its United Kingdom and Ireland card businesses. It has not decided whether to sell or wind down those operations, said bank spokesman Jerry Dubrowski.

The move effectively ends Bank of America's international consumer banking operations, and comes as it seeks ways to bulk up its capital cushion.

Analysts and investors said the sale is unlikely to cause a large, immediate increase in the bank's core capital levels.

"Each of these sales is a small piece or step, but once they're done, this could add up to a big impact," said Guggenheim Securities LLC analyst Marty Mosby.

The bank is fighting lawsuits and credit problems related to its ill-fated acquisition of home mortgage lender Countrywide Financial Corp three years ago as the U.S. housing bubble burst.

Bank of America has lost more than $22 billion in its consumer mortgage division in the last four quarters. It agreed in June to pay $8.5 billion to mortgage securities investors and is fighting numerous lawsuits challenging the settlement and other mortgage issues.

The bank said the sale was not a reaction to analyst estimates over the last week that it would need to raise capital to absorb those losses. The reports sent its shares down by 20 percent last Monday, and the stock has lost roughly half of its value so far this year.

The bank's shares were up 4.2 percent at $7.49 on the New York Stock Exchange.

Bank of America did not disclose the value of the transaction.

SELLING ASSETS

Last week, Chief Executive Brian Moynihan told investors that the bank has sold 23 businesses and assets over the last six quarters. Those sales have generated $30 billion in proceeds for the bank, according to spokesman Dubrowski.

The sales ranged from a large portion of the bank's stake in BlackRock Inc , the world's largest asset manager, to Balboa Insurance, which provides foreclosure insurance.

Earlier this summer, Bank of America sold a $1 billion portfolio, or 500,000 accounts, of its credit card portfolio to Regions Financial Corp .

It also agreed to sell its card business in Spain, and has sold a small business lending portfolio in the UK to Barclays .

TD Group said it would pay a "modest premium" for the card receivables from roughly 1.8 million active card accounts. A source familiar with the deal said the premium amounted to about $100 million.

For TD Bank, the deal will add Canada's fourth largest credit card portfolio to its books, and bank executives project that it will add $8.5 billion in card balances, said TD Canada Trust Chief Executive Tim Hockey.

It also makes TD one of the top card issuers in Canada, alongside perennial leader Canadian Imperial Bank of Commerce , and gives TD a portfolio of higher-margin loans at a time when consumer lending in Canada is expected to stall.

TD, Canada's second-largest bank, has been an active buyer in the United States following the 2008 financial crisis. It made a string of small retail bank acquisitions in 2009 and 2010, and recently closed a $6.3 billion takeover of auto lender Chrysler Financial.

(Additional reporting by David Henry in New York and Pav Jordan in Toronto. Editing by Robert MacMillan)

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