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HSBC in talks to sell US businesses

Bloomberg News / August 10, 2011

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HONG KONG - HSBC Holdings PLC is in talks to sell its US card and retail services unit as it pares North American operations to focus on faster-growing emerging markets and retail banking in the United Kingdom.

“These discussions are ongoing and no decision has yet been made to proceed with any transaction,’’ the London bank said in a filing yesterday. Capital One Financial Corp. is in advanced talks to purchase the credit card portfolio, a person familiar with the discussions said yesterday.

The negotiations follow HSBC’s agreement on July 31 to sell almost half its US outlets for about $1 billion amid a drop in the value of assets acquired when it bought a subprime lender in 2003. Europe’s largest bank plans to eliminate 30,000 jobs by the end of 2013 to curtail expenses.

“The disposal of assets will be positive for HSBC,’’ Sandy Mehta, chief executive for Hong Kong-based Value Investment Principals Ltd., said yesterday in a phone interview. “HSBC is in a good position that it is not a forced seller. It is well capitalized so it can take the time. It’s not distressed.’’

The UK bank acquired the credit card unit in 2003 as part of its $15.5 billion purchase of subprime mortgage lender Household International, now known as HSBC Finance. In 2009, HSBC halted consumer finance lending at the unit, which has contributed to about $60 billion of provisions in North America, according to data compiled by Bloomberg.

The card unit holds about $33 billion in customer loans, HSBC said in a May 11 presentation. About $13.6 billion of those were for private label, or store-branded cards, at year end 2010, said David Robertson, publisher of the Nilson Report, a payment-industry trade publication.

The business is profitable and “nonstrategic,’’ and a sale will depend on whether the bank gets a “sensible price,’’ HSBC chief executive Stuart Gulliver, 52, said in the May presentation to investors. The proposed job cuts exclude employees leaving when assets are sold, he said last week.