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RBC, Canada's largest bank, agreed to buy the Shoppers Optimum credit-card portfolio from Bank of America Corp. - this will considerably increase the size of it's existing MasterCard Inc. portfolio.  The deal will involve a co-branding pact with Shoppers Drug Mart Corp., Canada’s biggest pharmacy chain. The portfolio’s size and price have not been released to the public.  Three years ago Royal Bank agreed to introduce a co-branded MasterCard with WestJet Airlines Ltd. as the bank's first MasterCard credit-card offering in Canada. The latest card, named RBC Shoppers Optimum MasterCard, has no annual fees and allows users to earn reward points on purchases. 

What is the significance of this deal?  For RBC, increased profitability in the future.  Where do banks make money? on their credit operations of course.  And they charge the highest rates of interest on credit cards especially the co-branded ones.  So if you were going to pick which bank shares to buy, RBC would be a good one. The second one to watch out for is BMO.  BMO has an aggressive growth objective, and the positions that the bank has taken in overseas markets are good short to medium term - not so sure about the long term.  TD as always is the most aggressive in terms of it's growth objectives and it's openess and speed to act on strategies - this is a strength that the other banks cannot match.  Now you know which bank stocks I favor!

As for Shopper's Drug Mart, it is smart to offer a credit card.  Credit cards build loyal customers, and of course help the company's bottom line.  It will be interesting to see what happens to drug retailing with more American companies expanding their retail operations in Canada, such as Walmart, Target, and Costco.





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