HSBC North America Holdings Inc.'s presence in the U.S. credit card market remains a fraction of what it once was, but its recently renewed focus on the business appears to be paying off in the form of accelerating loan growth.
Regulatory data collected by S&P Global Market Intelligence shows that HSBC Holdings PLC's U.S. bank holding company ended 2018 with nearly $1.02 billion in credit card loans on a consolidated basis, up 41.4% from the same date in 2017. The book has grown year over year by double-digit percentages in all four of the full quarters since HSBC publicized a new suite of products in the U.S. card market, one that it had been widely viewed to have all but abandoned in 2012.
As part of a broader corporate effort to exit nonstrategic markets and dispose of businesses deemed to no longer represent a long-term strategic fit, HSBC USA Inc. and HSBC Finance Corp. in May 2012 sold their U.S. card and retail services business to Capital One Financial Corp. The deal involved the sale of approximately $28.2 billion in receivables and $600 million in other assets for consideration of $31.3 billion. The loans represented a mix of private-label cards issued in partnership with numerous retailers in addition to General Motors Co. and AFL-CIO co-branded cards and bank cards. After the divestiture, HSBC's U.S. banking unit continued to offer card products to certain of its customers and retained a portfolio of considerably smaller magnitude.
HSBC North America's card loans slowly declined to $656.3 million from $845.2 million from June 30, 2012, through Sept. 30, 2017. Shortly thereafter, the bank announced the U.S. launch of the HSBC Premier World Elite Mastercard, a product designed to complement its HSBC Premier suite of banking and wealth management products targeting affluent consumers. Applicants must maintain an HSBC Premier checking account to be eligible. The bank also used the opportunity to highlight the availability to the general public of two no-annual-fee cards, one focused on rewards and the other offering attractive teaser rates on purchases and balance transfers.
During a June 2018 strategic update call, HSBC Holdings Group CEO John Flint explained his perspective on the U.S. market as a whole and the card business specifically, in response to a question about why the bank needed to have a retail franchise in that country at all.
"We've actually got the infrastructure for a full-scale universal bank in the U.S.," he said at the time.
"We did exit two big retail businesses in the previous strategy phase," added Flint, a nearly 30-year veteran of HSBC who became group CEO in February 2018. "If we look at coming out of retail in its entirety, all we do is we change the problem. We don't solve the problem. ... We think the right answer is to retain the universal banking model, create efficiencies to make the investment we need to grow from here but grow all segments, including retail."
Flint pointed to the credit card launch as an initial way to target what he views as a "quite compelling" opportunity in the U.S. market.
"At present," he said in June 2018, "we have pretty much no unsecured exposure. ... It's very difficult to achieve industry levels of profitability if you just take deposits and warehouse mortgages on balance sheet, and that's the reality of our business. So we're going to build back into the unsecured space."
Among the 32 U.S. banking institutions at the top-tier level that ended 2017 with more than $500 million in card loans, HSBC North America Holdings 2018 growth rate was by far the highest, topping the 28% achieved by BBVA Compass Bancshares Inc. Only HSBC North America Holdings, BBVA Compass, Huntington Bancshares Inc. and American Express Co. among those 32 institutions generated double-digit growth rates in card loans in all four quarters of 2018. American Express, which maintains a decidedly larger book than the other three institutions put together, benefited from its January 2018 acquisition of the $1 billion Hilton Worldwide Holdings Inc. co-branded card portfolio from Citigroup Inc.
HSBC, at the group level, reported a year-over-year increase in credit card loans of $1 billion, excluding the impact of foreign exchange movements, in a result that the company primarily attributed to growth in the U.S. and Hong Kong markets.