HSBC sells US credit card unit for £1.6bn

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HSBC has agreed to sell its US credit cards business to Capital One for $2.6bn (£1.6bn) as the bank's new chief executive cuts back its sprawling global business.

The deal will transfer $29.6bn of customer loans to the US cards specialist and will boost HSBC's capital strength.

The sale also represents a further dismantling of HSBC's disastrous $15bn acquisition of Household International in 2003. The purchase of the US subprime lender racked up billions of pounds of losses for HSBC during the credit crisis.

Stuart Gulliver, who has led HSBC since the start of this year, is slashing non-core activities to concentrate on commercial banking, where HSBC is strongest – particularly its Asian heartland.

He announced in May that the US cards business was up for sale and last month sold 195 upstate New York branches, almost halving HSBC's underperforming US retail-banking network.

Mr Gulliver said the sale would help to focus HSBC's US operations on customers' international needs and would free capital for use elsewhere. The bank said the sale will boost HSBC's core tier-one capital ratio to 11.4 per cent from 10.8 per cent at the half-year.

The US cards business had few links to the rest of HSBC because many of its activities were in providing cards under the brands of retailers such as Sears.