Costco announced this week it is teaming up with Visa and Citigroup to release co-branded credit cards in the United States and Puerto Rico, Reuters reported.
Citigroup will exclusively issue the co-brand cards and Visa would provide the payment network, replacing American Express Co, from April 1, 2016, Costco said.
Visa shares rose 2 percent to a record high of $277.00 in early trading, while Citi shares rose 1.4 percent to $53.15.
"Costco is a solid co-brand partner given its affluent, captive member base and represents a solid win for Visa," J.P. Morgan Securities analyst Tien-tsin Huang wrote in a note.
Costco, which caters to relatively higher-income customers than Wal-Mart Stores Inc and Target Corp, said last month it would stop partnering with AmEx to issue co-branded cards for its U.S. stores.
American Express had said the loss of the contract, which was in place for sixteen years, would hurt its earnings for the next two years.
Stifel Nicolaus and Co Inc analyst John Davis said it was an "impressive win" for Visa, considering that 90 percent of Citi's U.S. credit cards are MasterCards.
The deal is expected to add $120 million of annual revenue to Visa or roughly about 10 cents in earnings per share, Davis added.
Costco, which sells everything from jewelry to fresh produce at its cavernous members-only stores, had already replaced AmEx with Capital One Financial Corp and MasterCard Inc as its card partner in Canada since the start of this year.
That move had raised speculation that the companies could also replace AmEx in the United States.
Costco's shares were up 0.6 percent at $147.90. MasterCard was up about 0.7 percent at $90.73 and Capital One was marginally up at $78.80.
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