Birmingham-based Regions Bank, a unit of Regions Financial Corp. (RF) has completed the purchase of the credit card portfolio of $1 billion from FIA Card Services, a subsidiary of Bank of America Corporation (BAC), effective June 30, 2011. The terms of the deal were not disclosed.
Last month, Regions announced to buy approximately 500,000 customer accounts, comprising existing Regions' customers, for an undisclosed amount from FIA Card Services. Additionally, Regions has acquired a portfolio of 40,000 business credit card accounts, representing a total portfolio of more than $1 billion.
Regions is expected to come up with more product offerings in the consumer market to compete effectively. The acquisition of the portfolio has accelerated Regions’ efforts to strengthen its balance between the consumer and commercial loan portfolios coupled with diversification of revenue streams to better serve its customers.
Regions made efforts for the past two years to attract new checking customers, who will now provide a strong platform for operating this business successfully.
Through the acquisition, Regions re-entered the credit card business, which it exited a decade ago. Prior to the agreement, Regions used to sell customers credit cards held and serviced by BofA's card business.
Further, FIA Card Services will continue to service the accounts held by Regions’ customers until mid-2012 as stated under an interim servicing agreement. After that Regions will merge credit card servicing into its industry-leading customer service environment. Combining the former MBNA America Bank and other Bank of America assets, FIA Card Services was formed in 2006.
With this deal, Regions is expanding its business. Therefore, it forms the basic responsibility of the company to build strong relationships with its customers.
Through extensive branch network and customers’ satisfaction, Regions plans to grow its credit card business. We expect the company’s expansion mode and its strategies to continue to yield profitable earnings in the upcoming quarters.
Currently, Regions retains a Zacks #3 Rank, which translates into a short-term Hold rating. Moreover, considering the fundamentals, we maintain a long-term Neutral recommendation on the stock.
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