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June 13, 2011

  • News:  HSBC Sells Card Portfolio 

    The CEO of HSBC no longer thinks the U.S. credit card business makes sense. The $33 billion dollar credit card business will be trimmed down if they cannot find a buyer, according to Stuart Gulliver, CEO of HSBC. Europe's biggest bank said they plan to cut up to $3.5 billion in costs and cut back in retail banking as part of their attempt to lift profitability. The size of the credit card portfolio makes it difficult to get rid of, especially since HSBC has said they will not give it away at a low price.

    Selling the U.S. credit card arm is potentially an uphill battle. HSBC had taken on a riskier client base as part of the expansion into the U.S. market. Industry members say Barclays and Capital One Financial Corp are the most likely buyers. They believe it is unlikely for any one buyer to buy the whole portfolio but Barclays and Capital One are expected to buy some of the credit card assets. The CARD Act's new regulations have made it harder for lenders to make a profit. After the economic crisis, few issuers can afford to buy such a large card portfolio.

    HSBC is looking to focus more on emerging markets such as Indonesia which Gulliver said on Monday was "one of our priority countries" and a target for investment. The U.S. credit card business is lucrative although it lends largely to riskier customers, unlike other business units at HSBC. That fact makes it hard for the bank to cross-sell their other products, unlike in markets like the UK, Hong Kong, and other emerging markets like Indonesia. The process to trim down the U.S. consumer loan business has begun and it will be spread over several years. As part of a recent review, they will be looking at selling, closing or trimming retail operations in 39 markets that are under performing or not profitable.

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