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Saturday 10 December 2016

HSBC to wind down US card arm if no buyer found

Neil Chatterjee

Published 14/06/2011 | 05:00

HSBC WILL wind down its $33bn (e47.5bn) US credit-card business if it cannot find a buyer, the bank's chief executive said yesterday.

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CEO Stuart Gulliver said he was upbeat in the medium term on the US economy but that the card business there did not make strategic sense.

"If we can't find a buyer we will put it into rundown," Mr Gulliver told reporters on the sidelines of a World Economic Forum event in Jakarta.

He said the review of the card business was continuing.

Europe's largest bank said last month it planned to slash up to $3.5bn in costs and cut back in retail banking as part of a global bid to lift its profitability.

Selling its US credit-card arm will be an uphill battle for HSBC, which saddled itself with riskier assets during its ill-fated expansion into US consumer lending.

The $33bn card portfolio is too large to be easily sold off, especially since HSBC said last month it was not willing to sell for just any price.

Barclays and Capital One Financial Corp are seen as the likeliest buyers for at least some of the card assets, according to several industry members, but it is unlikely they would buy the whole portfolio.

After the financial crisis, few buyers can afford such large credit-card portfolios, and increasing regulation of the credit-card industry has made it harder for lenders to turn a profit. Gulliver, who took over HSBC at the beginning of the year, plans to put more focus on emerging markets such as Indonesia, which he said yesterday was "one of our priority countries" and a target for investment.

"The cost of re-engineering has to come from other parts of the world, and from being smarter," Mr Gulliver added.

The US credit-card business is profitable, but it lends largely to riskier customers, unlike the rest of HSBC's businesses. That makes it harder for the bank to cross-sell other products to its US borrowers, unlike in retail banking markets in the UK, Hong Kong and emerging markets such as Indonesia.

HSBC is already in the process of winding down its US consumer loan business over several years.

Irish Independent

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