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Citigroup Inc. (C - Analyst Report) declared that it has entered into a strategic agreement with Best Buy Co., Inc. (BBY - Analyst Report) to issue as well as manage cards under the latter’s brand in the U.S. The deal constitutes Best Buy’s home brand of cards, which can be used only in its flagship stores, along with Mastercard Incorporated’s (MA - Analyst Report) cards bearing Best Buy’s symbol, which can be used for all purchases.

Additionally, Citi inked a deal with Capital One Financial Corp. (COF - Analyst Report) to acquire roughly $7 billion of Best Buy’s private label and its card loan portfolio. The aforementioned agreements are expected to be completed in the third quarter of 2013, subject to customary closing conditions. However, Citi does not expect the transactions to have a material impact on its 2013 earnings.

Citigroup's cards segment, Citi Retail Services, has returned to its earlier glory following the financial crisis in 2008. Thus, the bank turned round from its earlier intention to sale the assets. In 2011, Former Citigroup CEO Vikram Pandit moved the Citi Retail Services unit out of Citi Holdings division.

Citi Retail Services offers consumer as well as commercial credit card products, services, and retail solutions to national and regional retailers throughout North America. The business serves roughly 90 million accounts for a number of premier brands. The unit reported a $1.50 billion profit from continuing operations in 2012, compared with $1.48 billion in the prior year.

Management at Citi believes that the addition of Best Buy’s leading retail franchise and premium card portfolio to Citi Retail Services will substantially enhance its strong position in the U.S. market. Best Buy’s leadership position in consumer electronics, combined with Citi’s expertise, would further help in providing better service to the customers.

We believe that Citi’s agreement to issue Best Buy cards and acquire the loan portfolio from Capital One will result in a rise in revenues in the Citi Retail Services division.

Currently, Citi carries a Zacks Rank #3 (Hold).
 

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