HSBC said it aimed to slash up to $3.5 billion in costs and cut back in retail banking, to lift its return on equity. As part of this it is deciding whether to keep its U.S. card business, where its customer base is not linked to the rest of the group. HSBC’s credit card business may prove to be another liability instead.
The last evidence of predatory lender Household International, HSBC Finance and the bank’s credit card business consists largely of store branded credit cards. Best Buy consumer electronics stores remains as one of HSBC’s largest customers. Known as private label cards, the HSBC and merchant affiliation has been in existence since the days of Household International and resulted in a large number of complaints. New laws have reined in abusive practices.
If HSBC cannot sell their credit card business they will simply shut it down.
CEO Stuart Gulliver said he was upbeat in the medium term on the economy in the United States but that the card business there did not make strategic sense.
“If we can’t find a buyer we will put it into rundown,” Gulliver told reporters on the sidelines of a World Economic Forum event in Jakarta, adding the review of the card business was still ongoing.
Gulliver said the relationship of U.S. card holders was often with a store rather than the bank itself. That meant the bank could not cross-sell as it could in other retail banking markets which it is still focusing on, including the UK, Hong Kong and emerging markets such as Indonesia.
“We need to change the shape of our business,” Gulliver said.
What Gulliver really means is HSBC needs to get rid of HSBC Finance and the stigma of Household International. Perhaps HSBC will never rid itself of a willingness to buy a predatory lender and continue marketing that side of the business in the United States, even as such practices caused long term disaster in U.S. and world economies.
Clearly employees of HSBC Card Services are hoping for a buyer although layoffs are always associated with such mergers. HSBC bought Metris and employees lost their jobs as Metris was merged with what was then called HSBC Finance.