HSBC clinched the sale of its US credit card business to lending and banking group Capital One for a better than expected $32.7bn (£20bn) yesterday.
The deal hives off the capital-intensive credit card division of the bank and leaves HSBC with just its core private and premier banking businesses in the US, part of the bank’s $2.5bn streamlining programme.
The sale is another step toward unravelling HSBC’s $15bn purchase of US consumer lending firm Household in 2003. That established it as one of the world’s biggest credit card firms but loaded it with sub-prime losses.
HSBC will make a $2.4bn post-tax gain from the sale and said it would cut up to $40bn from the group’s risky asset base.
Group chief executive Stuart Gulliver said the deal would “allow capital to be redeployed over time.”
Capital One paid an 8.75 per cent premium to the operation’s $29.6bn gross loan balances, creating the higher than anticipated sale price.
Analysts had believed the loan book was worth $25-30bn in the months ahead of the sale. The cards operation made $1bn pre-tax profit in the first half of 2011.
Capital One, a credit card lender that has developed into a full bank over recent years, has been buying assets divested by international banks over recent months. In June it paid $9bn in cash and shares for ING Group’s US online bank.
HSBC added that it would still continue to offer credit cards to its customers through its HSBC Bank USA’s $1.1bn credit card programme.
ADVISER TO HSBC
JP MORGAN CHASE
JP Morgan Chase won the bragging rights for securing the position of lead adviser to HSBC, wheeling out its big guns for the task.
Leading the team is Alex Lynch, who has been managing director of the JP Morgan Securities subsidiary for over ten years, since 2000. He also serves as chairman of the North American Mergers and Acquisitions Group.
He is working alongside the renowned deal-maker Ian Hannam, famed for his influence in the mining sector. Hannam, who is a former member of the Territorial Army’s answer to the SAS, has been a long-term adviser of Xstrata. He led the reconstruction of Nat Rothschild’s ambitious coal mining group Vallar and was the chief adviser on the Heritage-Genel merger.
Alongside then-JP Morgan Cazenove chief executive Naguib Kheraj, he secured advisership on deals involving Land Securities and SVG Capital.
His other clients include Fresnillo, SAB Miller and Devro.
Also on the team advising HSBC is David Mayhew, Fernando Rivas, Eric Warmstein, Mark Feldman, Piers Davison and Simon Pilkington.