07/15/2011

JP Morgan Mulls Bid for HSBC Card Unit

J.P. Morgan is eyeballing HSBC’s U.S. credit-card business.

London-based HSBC put its $33 billion portfolio on the block last month, and began accepting bids a few weeks ago. So far, only Capital One has stepped forward as a formal bidder, though other credit-card operators, including GE Capital, appear to be considering offers.

HSBC’s portfolio is split between its own bankcard accounts and private-label cards written for retailers including Best Buy. Market players see J.P. Morgan as a natural bidder because it has long wanted to expand its private-label card business, viewing HSBC’s portfolio as something of a model. Indeed, prior to the credit crisis, J.P. Morgan went on a buying spree, snapping up in-house card programs from Kohl’s, Pier 1 Imports and Sears Canada.

Now, the New York bank is keen on resuming that effort. “What better way to get started than buying its one-time competitor,” a source said.

Another benefit for J.P. Morgan, or any other buyer, would be acquiring the residual payment streams from 12 HSBC card-bond offerings totaling $8.6 billion.

For its part, J.P. Morgan hasn’t been a frequent issuer of credit-card securities since the Financial Accounting Standards Board’s FAS 166 and 167 rules negated the balance-sheet advantages of securitization for banks. But after an 18-month absence from the card-bond market, J.P. Morgan has issued two $500 million deals this year — one in March and another in June.

A move by the bank to acquire the HSBC portfolio almost certainly would lead to a stepped-up issuance schedule, market players said.

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