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 Under a 10-year agreement likely to begin in the fourth quarter of
2014, Wells Fargo will offer private label and co-branded credit
cards on behalf of Dillard's, taking over from General Electric Co's
<GE.N> consumer finance unit. Financial terms of the deal were not
disclosed.
Expanding the size of Wells Fargo's credit card business has been a
priority for top executives, who have focused on getting more of
their existing retail customers to open accounts and use their cards
more frequently.
The bank has some success to show for it: 37 percent of its retail
households had a Wells Fargo credit card at the end of 2013,
compared with 27 percent at the end of 2011.
But the deal with Dillard's, a Little Rock, Arkansas-based
department store operator with fiscal 2014 revenue of about $6.7
billion, illustrates that the bank can also use its relationships
with existing commercial customers to boost that division.
Dillard's is a large banking customer of Wells Fargo, and issuing
cards branded for specific retailers who do other business with the
bank is a natural way for the credit card unit to expand, said Tom
Wolfe, Wells Fargo's executive vice president for consumer credit
solutions.
The San Francisco-based bank has lagged rivals like Citigroup Inc. <C.N>
and Capital One Financial Corp <COF.N> in issuing these private
label cards, according to data from the Nilson Report, an industry
publication. But Wells Fargo hopes to win more of this business in
the future. "This is one area that we'd like to spend some more time expanding,"
Wolfe said.
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Wells Fargo is not alone in wanting to boost its private label
business. GE's consumer finance unit, part of which filed for an
initial public offering in March under the name Synchrony Financial,
said in a March 13 securities filing that "the competition for
partners is intense and becoming more competitive." Synchrony listed
Wells Fargo as one of its primary competitors in the private label
credit card business.
Another area that Wells Fargo has identified as one where it is
"clearly underrepresented" in credit cards is among the affluent.
The bank announced a partnership with American Express Co <AXP.N> in
August to provide more competitive rewards and benefits to wealthy
consumers. A full-scale launch of those products is set to occur in
the first half of 2014.
(Reporting by Peter Rudegeair; editing by Steve Orlofsky)
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