Of Special Interest
- Financial wellness affects half of peoples’ mental or physical health, finds report
- Study finds traditional financial institutions embrace Fintech disruption
- Grass is greener for environmentally friendly businesses, finds Barclays
- Prospective homeowners would consider a 40-year mortgage to escape renting, finds Santander
- Millennials’ needs are changing the face of banking industry, says new report
- FS is putting consumer data at risk by failing to protect mobile apps, says Arxan
- A lack of belief in their ability holds 28% women back in work, says Cambridge & Counties
- ‘Which?’ reveals Scotland has lost over a third of its bank branches in eight years
- Next downturn unlikely to be as bad as 2008, according to S&P
- FCA reveals findings from first cryptoassets consumer research
- US consumers favour single mobile app for banking and payments
- Banks suffering major IT shutdowns every day, ‘Which?’ reveals
- The US will be a key offshore centre in 2019, says GlobalData
- Debit industry changes markedly in 10 years of the Debit Issuer Study
- UK's ‘Big Five’ face ‘too big to compete’ as small challengers secure stellar returns
- Banks as vulnerable now as before crash, says new study
- Leverage ratio a constant conundrum for European and US banks, says SNL
12th August 2011
Capital One purchase of HSBC US Card business
Capital One is to buy the HSBC US card business for approximately $32.7bn (€22.8bn £20.1bn ¥2,5tr Y209.7bn), an 8.75% premium on the gross customer loan balances. The sale consists of all of HSBC's MasterCard, Visa and various private label cards in the United States with the exception of HSBC Bank USA cards which will be retained. The business made a $2bn profit in 2010. The portfolios sold have been developed through direct marketing and co-branding arrangements, many originally formed by Household Financial, purchased by HSBC. Capital One say the deal will be funded "primarily with cash and the proceeds from the balance sheet repositioning related to the pending ING Direct acquisition". A maximum $750m of the sale price may be paid by a special issue Consideration shares. The stock would be entered onto the NYSE and would not be subject to any lock up period.
The deal is expected to close in the second quarter of 2012. All existing employees will be offered a job with Capital One. The US company expects the deal to be accretive from 2013 with a return on invested capital expected to be greater than 25% in 2013 and an internal rate of return in excess of 20%. HSBC expect a pre-tax gain of approximately $2.4bn and as at June 30th this year, the deal would have resulted in a 60bp increase in CT1 (Core Tier 1) capital taking the ratio to 11.4%.
For Capital One this represents five years of very fast growth. In December 2006 it purchased North Fork Bank and in 2008 Chevy Chase Bank. Earlier this year it purchased ING Direct USA. For HSBC this is a part of the major strategic redirection of the bank. The bank announced earlier this year it would end retail banking operations in various countries including the USA. It has already sold a major part of its US retail banking operation.