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Capital One Financial Corp. is looking for another private-label credit card portfolio to buy, as it absorbs the U.S. card business of HSBC Bank USA and the Kohl's Corp. store card portfolio, CEO Richard Fairbank said on Thursday.
October 21 -
Capital One Financial Corp. Chairman and Chief Executive Richard Fairbank says he believes the credit card business is headed for significant consolidation and that his company intends to be one of the industry's "endgame players."
September 14 -
HSBC is selling a card business for an 8.75% premium. It may be time for Citi to cut its price on a similar portfolio.
August 10
HSBC Holdings PLC sought to assure the markets Wednesday that modest troubles collecting from borrowers last quarter have not disrupted the pending sale of its U.S. credit cards to Capital One Financial Corp.
"On the disposition of this credit card business, this is a very tight contract — there is no get-out clause," Iain James Mackay, group finance director of HSBC, said in call with analysts discussing its third-quarter results.
"The prospective acquirer … really likes this portfolio," he said.
The $30 billion portfolio saw a "very slight seasonal pickup in delinquencies" that he does not "think is going to scare them away," he said.
Mackay did not offer specific figures.
The division remains an asset worth buying given a solid "underlying performance" that is "strongly profitable," Mackay said. The U.S. cards division has a "very attractive cost-efficiency ratio," and "good returns on investment capital in equity," he said.
He blamed the increase in delinquencies on a seasonal softness that, he said, HSBC tends to always see this time of year in cards and mortgages. The difference between cards and mortgages is that a credit card borrower is "very much focused on maintaining the utility of their" card but may be more inclined to let their home slip into foreclosure, he said.
HSBC has announced the sale of 14 assets or business lines this year as it restructures globally. The deals could release $40 billion of risk-weighted assets and more than 13,000 employees. It intends to reinvest that capital in fast-growing markets.
Capital One
The cards portfolio deal includes HSBC's MasterCard, Visa, private-label and other credit card operations. It does not include HSBC Bank USA's $1.1 billion credit card program.
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HSBC's North American operations — including its U.S. retail bank — reported a loss of $265 million for the quarter ended Sept. 30, compared with profits of $425 million in the prior quarter and a net loss of $448 million a year earlier. Lower operating income and higher loan impairment charges and provisions drove the quarterly loss.
The higher losses were in subprime loans in North America the company has been running off since 2009.