follow the money
Posted by Shirley Brady on August 10, 2011 11:00 AM
Following a strategic review of its global operations that was announced in May, HSBC will reap $2.4 billion by selling its credit card and retail services operations in the U.S. to Capital One. The $32.7 billion deal called "a home run" by TheStreet.com.
Stuart Gulliver, HSBC Group CEO, stated in a press release: "This transaction continues the execution of the strategy we announced at our Investor Day on 11 May to focus our US business on the international needs of customers in Commercial Banking, Global Banking & Markets, Retail Banking and Wealth Management and onshore Global Private Banking. Although dilutive in the short term, this transaction will reduce Group risk-weighted assets by up to US$40bn which, together with an estimated post-tax gain on sale of US$2.4bn, will allow capital to be redeployed over time."
He added: "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. All our employees will be offered the opportunity to join Capital One and 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."
A customer FAQ on the news stressed that HSBC is not exiting the U.S. — "As one of the world's largest banks in the global economy, the United States will remain an important market for HSBC and we will look to grow in those markets with strong international connectivity. Following this transaction, HSBC will have more than 260 branches across the U.S. in key international markets."
The news follows the bank's strong earnings, in addition to the announcement that it's downsizing its global workforce by 10%, cutting about 30,000 positions in the coming decade. Separately, HSBC is facing a class action suit in California related to an alleged violation of the state's labor code, and on July 31st announced it's selling 195 upstate New York branches to First Niagara.