HSBC in talks to sell U.S. card business

PUBLISHED : Wednesday, 10 August, 2011, 12:00am
UPDATED : Wednesday, 10 August, 2011, 12:00am
 

HSBC is in talks to sell its United States credit card portfolio, reportedly to Capital One Financial Corp, as part of its strategy of placing greater emphasis on emerging markets.

The largest lender in Europe and Hong Kong confirmed in a statement that it was in discussions to sell its US retail and credit card business, but HSBC did not name the potential buyer.

The statement was released after Bloomberg, quoting people familiar with the negotiations, reported that HSBC was in talks with Capital One Financial Corp.

'These discussions are ongoing and no decision has yet been made to proceed with any transaction,' the bank said. 'HSBC will make a further statement if or when appropriate.' A Capital One spokeswoman declined to comment.

If carried out, the deal would be the second transaction for Capital One. In June, the US lender, which provides commercial banking, credit card and car loan services, agreed to buy ING's US internet banking services for US$9 billion.

HSBC's US credit card portfolio held as much as US$33 billion in loans as of May, the bank said.

In May, HSBC chief executive Stuart Gulliver mooted the sale of the bank's US credit card business. He said HSBC would divest its loss-making retail banking business and focus on markets with high growth potential, such as China and India.

Gulliver said he wanted to sell the US credit card business because it was not a core business and had little cross-selling value for other HSBC operations.

Under his plan to cut costs and boost revenue, HSBC will cut 30,000 employees from its global headcount of 296,000 by 2013. The bank also wants to cut annual costs by US$3.5 billion by then. It recently shut its retail banking businesses in Russia and Poland and sold three non-strategic insurance businesses in Britain, Mexico and Bermuda.

The bank is also considering whether to divest its 195 retail branches in the United States.

Louis Tse Ming-kwong, a director of VC Brokerage, said HSBC had made the right decision to exit the US. 'The financial figures have shown the US economic outlook is not optimistic,' Tse said. 'It is better for HSBC to exit the US market and to use its resources to focus on expanding in Greater China, Asia and emerging markets.' However, the current global financial markets gyrations could affect HSBC's negotiations, he said.

'Capital One may bargain for a lower price, while HSBC may not like to sell the asset too cheaply,' Tse said. 'The market slump may mean the two banks would need more time for negotiations.'

Ben Kwong Man-bun, chief operating officer of KGI Asia, said it was not surprising to see HSBC consider selling its US credit card business. However, the sale would do little to boost its recent weak share price due to the global markets slump, Kwong said.

$60b

The amount of provisions for bad debts made against HSBC's US credit card business. The bank has 95 million customers in 87 markets

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