The Successful Investor Hotline – Friday, August 19, 2011

Article Excerpt

TORONTO-DOMINION BANK, $71.10, Toronto symbol TD, has agreed to buy MBNA’s Canadian credit card operations from Bank of America (New York symbol BAC). This purchase will add 1.8 million customers to TD’s roughly 4.0 million credit-card accounts. MBNA is also the largest issuer of MasterCard cards in Canada, which will diversify TD’s Visa cards. TD will pay $8.5 billion for MBNA’s Canadian credit-card operations when the deal closes, probably early next year. To put that in context, TD earned $5.2 billion, or $5.77 a share, in its 2010 fiscal year, which ended October 31, 2010. The bank plans to sell up to 8 million common shares to help pay for this purchase. That will increase the total outstanding by about 1%. This looks like a good deal for TD. The price it is paying is just slightly more than the value of these credit-card receivables. That’s because Bank of America needs to raise cash to meet more stringent U.S. capitalization requirements for banks in…