Magazine article American Banker

HSBC's U.S. Cards Portfolio Suffers Tough Quarter

Magazine article American Banker

HSBC's U.S. Cards Portfolio Suffers Tough Quarter

Article excerpt

Byline: Matthew Monks

HSBC Holdings PLC sought to assure the markets Wednesday that modest troubles collecting from borrowers last quarter have not disrupted the pending sale of its U.S. credit cards to Capital One Financial Corp.

"On the disposition of this credit card business, this is a very tight contract a there is no get-out clause," Iain James Mackay, group finance director of HSBC, said in call with analysts discussing its third-quarter results.

"The prospective acquirer a[bar] really likes this portfolio," he said.

The $30 billion portfolio saw a "very slight seasonal pickup in delinquencies" that he does not "think is going to scare them away," he said.

Mackay did not offer specific figures.

The division remains an asset worth buying given a solid "underlying performance" that is "strongly profitable," Mackay said. The U.S. cards division has a "very attractive cost-efficiency ratio," and "good returns on investment capital in equity," he said.

He blamed the increase in delinquencies on a seasonal softness that, he said, HSBC tends to always see this time of year in cards and mortgages. The difference between cards and mortgages is that a credit card borrower is "very much focused on maintaining the utility of their" card but may be more inclined to let their home slip into foreclosure, he said.

HSBC has announced the sale of 14 assets or business lines this year as it restructures globally. The deals could release $40 billion of risk-weighted assets and more than 13,000 employees. …

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