Just 10 days after agreeing to sell its upstate New York branches, HSBC Holdings Plc agreed Wednesday to unload the bulk of its U.S. credit card business, selling $29.6 billion in loans to Capital One Financial Corp. for about $2.6 billion.
About 140 people in Buffalo are affected and are being offered jobs at Capital One. It's not clear if they will have to move to keep their jobs. Buffalo is not one of eight facilities that Capital One is getting in the deal.
The sale to Capital One, part of HSBC's previously disclosed revamping of its business strategy and operations, will take HSBC out of another major aspect of its retail and consumer banking business in the U.S.
It follows the $1 billion sale of 195 branches in upstate New York and Connecticut to First Niagara Financial Group last month. That sale included HSBC's upstate New York retail credit card customers and loans -- including those in Buffalo -- as part of its July 30 deal with First Niagara.
The sale of the HSBC Finance Corp. unit does not include the $1.1 billion credit card business of HSBC Bank USA, its primary U.S. bank. That unit will continue offering credit cards to its U.S. customer base outside upstate New York.
HSBC is also retaining its corporate card business, which is run out of HSBC Bank USA and serves commercial and wholesale banking clients, including those in upstate New York, said spokesman Robert Sherman. He said that business fits with the bank's new strategic focus in the United States, aimed at businesses that engage in trade, wealthy customers and cities with large Asian, Hispanic or international populations.
Most of the Buffalo-area workers affected are in the card fraud prevention and investigations, Sherman said. Under the agreement with Capital One, all employees of the card business, known as HSBC Card and Retail Services, will be able to join Capital One.
"HSBC is pleased to be working with Capital One on this transaction, given its strong commitment to maintaining relationships with HSBC's customers, as well as its credit card and retail merchant partners," HSBC Group CEO Stuart Gulliver, who took the helm in January, said in a news release.
"I would like to take this opportunity to thank the management team and employees for their dedication and wish them every success for the future."
Capital One, based in McLean, Va., is a major banking and credit card company, with about $200 billion in assets, $129 billion in loans and $126 billion in deposits, as well as about 1,000 branches primarily in six states and the District of Columbia. Its roots are in credit cards, where it's the No. 5 issuer, but it's been expanding into branch banking. It also just bought ING Direct USA, the Internet bank of Dutch giant ING Groep NV, for $9 billion.
"The acquisition of HSBC's domestic credit card business is an attractive strategic and financial opportunity in a business we know well," said Capital One Chairman and CEO Richard D. Fairbank.
London-based HSBC, one of the world's largest banks, has been undergoing a massive reorganization since May, when Gulliver unveiled a major change in global strategy designed to boost the bank's revenues and profits by refocusing its energy on commercial banking and emerging markets.
Two-fifths of its operations in 87 countries were not meeting the bank's minimum cost of capital, so the bank said it would target only 18 markets for wealth management and would fix, bulk up or get out of retail banking in 39 countries where its performance was weak. The plan also included cutting $2.5 billion to $3.5 billion in expenses, and HSBC said last week that it expects to cut 30,000 jobs by the end of 2013.
In the United States, HSBC said its retail branches in upstate New York -- a legacy of its 1980 purchase of Marine Midland Bank -- were underperforming, and were no longer a core part of its strategy. Similarly, the credit card business, although it had remained profitable throughout the financial crisis, was also not connected to the rest of the company, so executives felt they couldn't justify continued investment in it.
"This transaction continues the execution of the strategy we announced," Gulliver said.
The sale includes most of HSBC's Visa and MasterCard credit cards and all private-label store credit card programs -- such as with retailers like Best Buy, Costco, Bon-Ton and OfficeMax -- as well as its co-branded cards with General Motors Co. and the AFL-CIO. The cards are offered nationwide through affinity, co-brand and merchant relationships, direct mail and the Internet.
The deal is expected to close in the first half of 2012, subject to regulatory approvals.