BofA Sheds More Credit Card Business... Changing the Credit Sector (BAC, TD, COF, WFC, RF, C, BK, AXP, V, MA)

Bank of America Corp. (NYSE: BAC) is selling more assets as it raises capital in an effort to stem the drop in the company’s share price related to its purchase of Countrywide in 2008. Today’s sale transfers the bank’s $8.6 billion credit card portfolio to the Toronto-Dominion Bank (NYSE: TD) for an undisclosed amount. The bank will also “exit” its UK and Irish credit card business, although no buyer was mentioned.

So what’s BofA’s $8.6 billion really worth? Capital One Financial Corp. (NYSE: COF) reports today that 30-day delinquencies on its credit card business rose slightly from 3.3% in June to 3.37% in July. Thirty-day delinquencies in Capital One’s auto loan business rose from 6.51% to 6.84% over the same period. US credit card write-downs in July fell, however, from 4.41% in June to 3.77% in July. Internationally, charge-offs fell from 7.19% to 6.59%.

Last Friday Morgan Stanley lowered its target price on several banks, including BofA, which saw its target fall -12%, from $17/share to $15. Goldman Sachs had dropped its target price earlier in the week from $13, to $10. Morgan Stanley also lowered target prices at Regions Financial Corp. (NYSE: RF) by -11%, Wells Fargo & Co. (NYSE: WFC) by -8%, Citigroup Inc. (NYSE: C) by -7%, and Bank of New York Mellon (NYSE: BK) by -7%. The target price for American Express Co. (NYSE: AXP) was unchanged.

Card issuers Visa, Inc. (NYSE: V) and Mastercard Inc. (NYSE: MA) have dodged the downgrades on the strength of their debit and card business. The little plastic cards are especially popular internationally, exactly the businesses that BofA is selling. The bank has already sold its UK business lending portfolio and has an agreement to sell its Spanish credit card business to Apollo Capital Management, Inc. The bank’s portfolio of loans in the UK and Ireland totals $19 billion.

It’s pretty easy to discount BofA’s claim in this morning’s announcement that “an international consumer card business under another brand is not consistent” with the company’s strategic direction. The international cards are making money for everyone else. Perhaps making money is not consistent with the bank’s strategy.

In the event, today’s sale and the planned sale of the UK and Irish business are less about strategy and more about raising capital for BofA’s long and winding road.

The bank’s shares opened up more than 3.75% this morning, at $7.46, in a 52-week range of $6.31-$15.31. That’s some good news for investors — for a change.

Paul Ausick