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The U.S. retail banking arm of HSBC Holdings PLC posted its first full-year profit in three years, and loan losses fell at another U.S. affiliate.
February 28 -
HSBC Holdings PLC is reviewing a first round of bids taken on its $60 billion residential servicing portfolio, but has yet to make a decision on the sale, according to industry advisers familiar with the matter.
February 11
HSBC Holdings PLC may pull up two of its biggest — and up until now largely untouched — stakes in its long, painful retreat from the U.S. market: credit cards and brick-and-mortar banking.
The London banking conglomerate — still smarting stateside from a disastrous purchase of the subprime lender Household nearly 10 years ago — on Wednesday said that it may sell its U.S. credit card business and "rightsize" its U.S. branch network.
That raises the question: Who would be interested in either the profitable U.S. cards business, with a relatively large $32 billion in outstanding balances and a potential $4 billion premium, or some of its 480 branches, most of which are in sleepy upstate New York?
Experts pegged a handful of potential buyers for the various assets HSBC said it might consider unloading under a companywide plan to cut $3.5 billion in costs by 2013. Capital One Financial Corp. would be a logical buyer of pieces of HSBC's private-label card assets, should HSBC be open to selling its cards operation in chunks. Bank of America Corp. and JPMorgan Chase & Co. could be candidates for HSBC's co-branded and affinity card portfolios, though both have been selective about acquiring those kinds of assets.
They could present an opportunity for foreign players such as Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA to enter the U.S.
Difficulties Citigroup Inc. and General Electric Co. have had with entire portfolios of cards suggest HSBC might have more success breaking up and selling the division in bits.
"There is certainly appetite out there," said Leigh Allen, a consultant with Global Consumer Finance Advisory LLC in New York. "What we're seeing, though, is that it's more strategic with big U.S. players or even the midsize players. It's less about the consolidation play and it's more about wanting to find growth, but they want to find growth that fits with their strategy."
Robert Hammer, the chairman and chief executive of the credit card consultancy R.K. Hammer in Thousand Oaks, Calif., said HSBC's entire credit card loan portfolio could fetch a premium of about 12.5% based on historical trends and its makeup of both private-label cards, which typically garner lower premiums, and general card loans, which typically generate higher premiums.
Based on that percentage, a buyer could wind up paying about $36 billion for the portfolio, assuming they paid par value for the $32 billion in loans plus a $4 billion premium.
The candidates for its retail branches depend on which ones it would look to sell. Experts say the most likely candidate would be some or all of its 375-branch New York franchise, the legacy operations of Buffalo's Marine Midland, which HSBC acquired outright in 1987.
Most of those locations fall outside the "internationally connected metro areas" where HSBC said in a presentation on Wednesday that it wants to keep a presence. HSBC is largely abandoning consumer-oriented U.S. banking to focus on selling commercial banking services to internationally minded U.S. businesses in New Orleans, Houston, Los Angeles, Seattle and other port cities. It will also continue emphasizing in the U.S. its high-end online banking program, Premier, which it offers to well-to-do clients with global investments.
"What they may do is dump the upstate operation and just keep the city," said Bert Ely, an independent banking consultant. "You have got some major players up there."
Two of them are among the healthiest and most acquisitive banks in the country: First Niagara Financial Group Inc. and M&T Bank Corp Inc. Buying HSBC's 61-branch, $12 billion-deposit Buffalo, N.Y., operations would make either the No. 1 player in their hometown. HSBC has 37% of Buffalo's deposits, according to regulatory filings. M&T has 29%; First Niagara, 11%.
The other major big bank player in Buffalo is KeyCorp, though it has said it doesn't plan to pursue acquisitions for a while.
HSBC's 234 branches in and around New York City, meanwhile, are a rare and highly desirable property. Were HSBC to put that on the market, the most viable candidates would be the handful of healthy regional banks with a presence there that are on the prowl for deals, including: PNC Financial Services Group Inc., Toronto-Dominion Bank and New York Community Bancorp.
HSBC on Wednesday said that its U.S. operations made $870 million in the first quarter, down 34% from a year earlier. U.S. banking profits were down more than 62%. Credit cards and retail services profits, meanwhile, fell 8%.
Last year, HSBC executives had said U.S. cards — one of the rare areas where it has stayed profitable in the states — was integral to its ambitions as a global credit card provider. On Wednesday, a presentation from HSBC's U.S. banking chief executive, Niall Booker, said that business is "not fully aligned" with its "strategic customer base" of wealthy U.S. consumers that bank online, and businesses with interests overseas.
