HSBC has agreed to sell its U.S. credit card division to Capital One only a few months after announcing it may let the division go. As a result of the sale, Capital One, which is looking to grow in emerging markets, stands to reap a $2.4 billion after-tax gain.
Capital One to Pay $32.7 Billion
London-based HSBC announced in a statement on Tuesday that Capital One will pay a $2.6 billion premium to the division’s loans to customers for a total price of about $32.7 billion. Capital One said the acquisition will add to its earnings in 2013.
The purchase also allows the bank to expand even more after acquiring ING Groep NV’s U.S. online bank in June. The purchase was known as a “game-changing transaction” for Capital One as it moved from the eighth largest bank in the U.S. to the number five spot by acquiring the online-only bank that it plans to expand with brick-and-mortar locations.
HSBC Looking for Change
In June, HSBC CEO Stuart Gulliver announced that he was looking for a buyer for his credit card business because it no longer made strategic sense to keep it within the company.
HSBC had already expanded years prior by purchasing U.S. subprime lender Household International in 2003 for $15.5 billion, but by 2009 had halted consumer-finance lending at the unit. Gulliver said he also began to realize that his U.S. card business wasn’t linking well with the rest of the company’s retail banking group. As a result, he was ready to sell.
The U.S. isn’t the only place the U.K. lender has chosen to eliminate business dealings. HSBC has already sold assets in Russia and will shut branches in Poland. In all, the company plans to sell almost half of its U.S. outlets for about $1 billion and cut 30,000 jobs by the end of 2013 to par costs.
I guess I will be writing checks again.