HSBC Holdings PLC is poised to sell its $30-billion (U.S.) credit card book to Capital One Financial Corp., the Virginia-based lender, as it steps up efforts to reposition its troubled U.S. retail operation.
The business was part of the subprime lender Household, which HSBC acquired in 2003 only to write down huge losses on the assets as the financial crisis hit.
Stuart Gulliver, who took over as chief executive of HSBC at the start of this year, says he is determined to make quick progress in cleaning up the U.S. division.
Ahead of the bank’s first-half results last week he announced the $1-billion sale of 195 branches in upstate New York to First Niagara Financial Group Inc., the Buffalo-based bank.
Mr. Gulliver also confirmed that the bank was in talks with more than one buyer about a sale of the cards division. People familiar with the situation said the final details of the deal were being thrashed out on Tuesday night, with an announcement expected as early as Wednesday.
In a statement on Tuesday HSBC said: “These discussions are ongoing and no decision has yet been made to proceed with any transaction.”
The bank is keen to pare back its mass market consumer finance services in the U.S. and focus instead on targeting wealthier customers through its “Premier” product range. The bank also wants to build up its commercial and investment banking businesses in the U.S., particularly where customers have strong international trade links.
For Capital One the purchase of HSBC’s card division would represent the second significant acquisition this year.
In June it agreed a $9-billion cash-and-stock deal to buy ING Direct USA, part of the Dutch bank’s online banking arm.
At the time Capital One – which started out in 1988 as a standalone credit card issuer – signalled that it would seek opportunities to buy assets, having bolstered its deposit base by $82-billion through the ING deal.
Its aim, said people familiar with the matter, was to put ING Direct’s funds into higher-yielding assets, including credit cards.
While ING’s U.S. business had proved adept at deposit-gathering, the operations had been neglected since its Dutch parent hit trouble, these people said.
Capital One has built up a 1,000-strong branch network, helped by the acquisitions of retail banks Hibernia and North Fork in 2005 and 2006, respectively.
The ING Direct deal put the bank in fifth place in terms of domestic deposits, behind Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc.
HSBC’s credit card portfolio is profitable and has just over $30-billion of balances.
Overall, the bank’s U.S. retail banking and wealth management division made a $568-million pre-tax loss in the first six months of this year, an improvement on the $1.57-billion loss it posted a year earlier.