Capital One Financial Corp. and Wells Fargo are both bidding for HSBC Plc.’s U.S. credit card portfolio as HSBC executives plan to focus on the company's main businesses in Europe.
HSBC is also selling its assets for its upstate New York branches, Reuters reports, with U.S. regional banks First Niagara Financial Group, KeyCorp and M&T Bank Corp. counting themselves among the bidders for the sale.
The bank’s executives said they are also considering selling the U.S. credit card unit, which has more than $30 billion in assets. They have also said the bank would shrink its network of 475 U.S. branches to focus on a revival in the U.S. manufacturing industry as well as focus on the international business of U.S. clients and the U.S. business of overseas firms.
Capitol One recently agreed to buy ING Groep’s online U.S. bank for $9 billion. The deal is expected to leave Capitol One with ample deposits for it to fund the HSBC credit card portfolio.
Loan demand has been weak in recent years, which has led banks to look for ways to boost their loan books to increase profits.
Antitrust matters are a big hurdle for some bidders in the branch sale because several markets in New York are already controlled by just a few banks, Reuters reports. The buyer, however, will have the option to sell branches to comply with regulations similar to how PNC Financial Services Group sold some branches when it bought National City, according to Reuters.
Another option to avoid antitrust problems would be for several smaller banks to be the buyers for any branches that need to be sold as a result.
The loans and deposits included in the HSBC deal are still unclear and can have a big impact on any buyers' profit from the branches, according to Reuters.
HSBC corporate clients with loans that are not sold may not be interested in depositing their money in a branch belonging to another bank, which could influence the amount of deposits that will stay with the branches.
Initially, HSBC planned on finding one bidder for the sales but is now open to selling the credit card and branches separately because they could get a better price, according to Reuters.
The credit card portfolio includes private label credit cards from companies like Best Buy, Neiman Marcus and Saks. A retailer typically has the right to end the relationship if it doesn’t want to move business to the new company.