The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Too many private label cards? Capital One awaits tentatively on HSBC buy

Hat Tip: ( Kohls-COF)  (COF – HSBC)

As the HSBC purchase for $30 bln gets into “TBTF” issues though funded by good deposits of $80 bln from ING direct in a separate purchase, Capital One awaits eagerly for approval. Authorities reopened the deal for public comments as fears were expressed that the new #3 ranked private label cards provider would become unilaterally exposed to credit card business risk after the acquisition

HSBC expected to book the $2.4 bln gain on the sale in June 2012. the comments period was extended by 6 weeks and now runs till December 19. ?It is unfortunate that such questions could deny Capital One the opportunity to grow into a leadership role more befitting its brand as it has also gone far extraordinarily by growing diverse business lines with the purchase of ING Direct (Orange) in the USA which should not be evaluated independently when the question is of risk concentration in the same business ( retail credit cards)

Neiman Marcus

Image via Wikipedia

HSBC has a great portfolio of in store cards like Saks, Neiman Marcus and others

Capital one had earlier signed with Kohl’s and got 20 mln credit card accounts from the retailer transferred in April 2011. Kohls’ eaarlier agreement was running with JP Morgan

Kohl’s credit card business accounted for half of its 2010 revenue and will accrue the same revenues in 2011 according to the retailer.

Capital One’s earlier double bid for HSBC and Orange (ING) was seen as a successful strategic bid to grow into a larger diversified bank and is unlikely that someone with just retail exposure could be Too systematically big, Risk concentration in unsecured retail is effectively absorbed by the stable deposits from the new Orange acquisition without which its acquisition of sucha large card portfolio would have been in question and was seen as imposed by financing considerations



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This entry was posted on December 12, 2011 by in Banking, Financial Services, US and tagged , , , , , , , .


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