HSBC to make $2.4bn from credit card switch
Bank looks to scale back consumer-focussed operations in the US
By CFOWorld.co.uk | CFO UK | Published 14:05, 10 August 11
HSBC expects to earn $2.4 billion (£1.47 billion) as it switches its US credit card assets to Capital One.
The sell off is part of the UK-based bank’s effort to refocus its consumer retail business in the US and deliver group-wide cost savings of close to $3.5 billion over the next few years.
The credit card unit carries $30 billion worth of assets and Capital One has agreed to pay primarily in cash but also with $750 million worth of company stock.
The credit card business earned $600 million in after-tax profit for the half year ended 30 June 2011. HSBC said the deal would boost its consolidated core Tier 1 capital adequacy ratio by 60 basis points to 11.4 percent at the end of June.
The deal marks the second time Capital One has swooped for unwanted US assets from a retreating European bank in recent months, having agreed to buy ING’s US online bank for $9 billion in June.
“This transaction continues the execution of the strategy we announced at our investor day... to focus our US business on the international needs of customers in commercial banking, global banking and markets,” said HSBC’s chief executive Stuart Gulliver in a statement.
Earlier this month, the bank also announced it will axe 30,000 jobs as it slashes costs and retreats from countries such as Russia, Poland and the United States, where it is struggling to compete.
HSBC has been criticised for spreading itself too widely, gathering roughly 95 million customers across 87 markets, and Gulliver is aiming to put focus back on profitability.
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