Moving ahead in selling off its U.S. consumer loan portfolios, HSBC Holdings plc (HBC) announced the divestiture of certain of the same. The company signed a deal with SpringCastle Acquisition LLC, a subsidiary of Springleaf Finance, Inc. and Newcastle Investment Corp. (NCT) to vend these portfolios for $3.2 billion in cash.
The loan portfolios being sold comprise of approximately 400,000 personal homeowner loans and personal unsecured loans, which were originated by HSBC’s U.S. division – HSBC Finance Corporation. The transaction, still subject to customary closing conditions, is expected to close in the second quarter of 2013.
Concurrently, HSBC also entered in to a separate agreement with Springleaf to sell its loan servicing facility and other related assets in Ky. This deal is expected to be closed by the end of this year. Following the completion of the deal, almost all the employees of the loan servicing facility will come under the payroll of Springleaf.
HSBC stated that the total face value of portfolios, including the value of the abovementioned facility, was roughly $3.4 billion as of Dec 31, 2012.
HSBC made significant progress in executing the strategy to reshape itself and improve its returns. Since 2011, the company has announced the divestiture or closure of 47 of its non-core/unprofitable operations across the globe.
In the U.S., HSBC has completed two major divestitures. Last year, the company sold its credit-card unit to Capital One Financial Corp. (COF) for $31.3 billion in cash. Moreover, the company vended 195 of its retail branches, primarily in N.Y., to First Niagara Bank, N.A. – a wing of First Niagara Financial Group Inc. (FNFG) – for approximately $1 billion in cash.
The sale of loan portfolios in the U.S. marks a concrete step by HSBC towards achieving its strategic goal of minimizing its concentration in the country. Yet, at the same time, the bank continues to serve relentlessly to the needs of its American consumers through its commercial and corporate banking facility.
HSBC currently retains a Zacks Rank #3 (Hold).
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