Capital One to buy HSBC U.S. credit card arm
MCLEAN, Virginia — Capital One Financial Corp. said Wednesday that it will buy the U.S. credit card arm of Britain's HSBC for a premium of about $2.6 billion as a way to expand its domestic credit card business.
"Adding the HSBC card business to our own will enhance our credit card franchise and accelerate our achievement of a leadership position in retail card partnerships," Capital One Chairman and CEO Richard Fairbank said in a statement.
The acquisition includes the HSBC unit's approximately $30 billion credit card portfolio.
Capital One shares rose 87 cents, or 2.1 percent, to $41.69 in premarket trading.
HSBC announced in May that it was exploring a possible sale of the business, which includes its MasterCard, Visa, private label and other credit card operations. The deal does not includes HSBC Bank U.S.A's $1.1 billion credit card program.
The sale of the U.S. credit card division comes a little more than a week after HSBC announced that it will sell almost half its retail branches in the United States. That includes the sale of 195 branches in New York and Connecticut to First Niagara Financial Group.
HSBC said the two actions are part of its plan to make HSBC a more internationally focused business, but reassured that the U.S. is still considered a key market in its strategy.
HSBC and Capital One said that they expect no immediate changes to the credit card programs and operations. HSBC customers will see no near-term service changes and should be able to use their credit cards like normal.
The division's gross assets were valued at $30.4 billion as of June 30, which includes approximately $29.6 billion in gross customer loan balances.
Capital One, which is based in McLean, Virginia, expects to fund HSBC credit card loans mostly with cash and proceeds from repositioning its balance sheet for its buyout of ING Direct. Capital One agreed to purchase ING Direct's U.S. online banking service in June for about $9 billion in cash and stock.
Capital One said the deal should provide a significant boost to its 2013 operating earnings and help raise about $1.25 billion in capital.
It also has the option to issue $750 million of the $1.25 billion in capital to HSBC at $39.23 per share, which is the average of Capital One's closing prices the past two days.
The bank said the acquisition will result in about $350 million in cost savings. It will also incur approximately $420 million in restructuring costs tied to the deal.
HSBC Group CEO Stuart Gulliver said in a statement that it will see a $2.4 billion gain on the sale, which will allow HSBC to redeploy capital over time.
HSBC said that all of the unit's employees will be offered jobs with Capital One.
The acquisition is expected to close in the second quarter of 2012.