Capital One Financial Corp., the credit card giant that bought HSBC Holdings Plc's U.S. credit card unit, is laying off 80 employees in Buffalo and nearly 900 in California as it closes both operations over the next 12 months, officials said.
Just days after formally taking over the operations, and just two weeks after warning that the $2.6 billion purchase would hurt second-quarter profits, the McLean, Va.-based company confirmed Thursday that it will close the Buffalo office on the 15th floor of the One HSBC Center tower by the end of the year.
"Capital One leaders have made the difficult business decision to exit the Buffalo location by the end of the year as part of an overall plan that best meets the long-term goals of our company and serves the needs of our customers," spokeswoman Julie Rakes said by email.
"This is a very tough decision, and we will work closely with our impacted associates in all locations."
The company is also shuttering the massive credit-card processing, administrative and business operations facility in Salinas, Calif., in June 2013, laying off 870 employees. That operation had been the headquarters for HSBC's credit card operation, and HSBC was the largest employer in the city.
Meanwhile, it's adding 400 jobs in South Dakota, on top of 400 already there.
The company, which said the moves reflected its "business needs," broke the news to employees this week in special staff meetings. The company will send out formal 90-day notices later.
In the meantime, the company will provide career counseling services, inCAPITAL ONE from D6
cluding an on-site career development center and at least four hours each week during the transition period to seek out new jobs. Capital One will also host both internal and external job fairs and will give employees a chance to apply for open jobs elsewhere in the company, with relocation packages in some cases. Employees will also receive severance and other benefits.
"No one is losing their job today," Rakes said. "We're telling employees now so they have time to consider their options."
Capital One agreed last August to pay $2.59 billion to buy the HSBC Card and Retail Services business, just a week after HSBC agreed to sell its upstate New York branch business to First Niagara Financial Group for $1 billion. The two deals were part of HSBC's global restructuring, aimed at cutting 30,000 jobs and reducing costs by $3.5 billion a year. The branch deal, for 195 offices, will close May 18.
The credit card deal includes its U.S. Visa and MasterCard accounts, as well as its affinity, co-branded and private-label cards, which are offered nationwide through direct mail, the Internet and relationships with partners and merchants, such as General Motors, the AFL-CIO, Saks Fifth Avenue, Neiman Marcus and Best Buy.
In all, HSBC had about $30.4 billion in assets -- mostly card loans -- that Capital One acquired in an effort to bulk up its own national card business and become the third-largest private label issuer in the country.
At the time the deal was announced, though, the companies said all employees were to be offered jobs. Officials expected to incur $420 million in restructuring costs, but to reduce expenses by $350 million and boost earnings next year. And they claimed it was a low-risk deal.
Then, in November, Capital One agreed to keep 400 HSBC credit card jobs in Sioux Falls, S.D., where both banks had existing call centers that were combined, and then said it would double the workforce this year. And last month, it announced higher-than-expected first-quarter earnings, but said second-quarter results would be hurt by reserves for loan losses, as well as for refunding finance charges and fees for certain customers.
However, Rakes denied that the company is worried about the value of the deal.
"This decision is based on the long-term strategy of our business," she said. "We continue to believe that the transaction is financially and strategically compelling, and we're as excited about it today as when we announced the deal last summer."