HSBC sells US credit cards

Banking giant HSBC today sold its massive US credit and stores cards business for a profit of $2.4 billion (£1.5 billion) as part of its new chief executive Stuart Gulliver's plan to cut non-core businesses and make cost savings of $3.5 billion.

The deal, which is valued at $32.7 billion, will see $29.6 billion of gross customer loans transferred from HSBC to the buyer Capital One.

This will help improve the London-listed bank's key core tier 1 capital ratio, which is the main regulator measure of balance-sheet strength, from 10.8% to 11.4%.

The US cards business made a pre-tax profit of $1 billion in the first half and its sale will mean lower profits in the short term.

Gulliver said: "Although dilutive in the short term, this transaction will reduce group risk-weighted assets by up to $40 billion which, together with an estimated post-tax gain on sale of $2.4 billion, will allow capital to be redeployed over time."

HSBC last week sold almost half of its underperforming US branch network, offloading 195 branches to First Niagara Financial Group for $1 billion and closing 13 more.

It also announced up to 30,000 job cuts worldwide.

HSBC's shares rose 12.85p to 550.65p.

Broker Daniel Stewart said: "This looks like a good price and fits with Stuart Gulliver's more-focussed strategy, which entails greater focus on corporate business in many territories."