HSBC sells ‘near-prime’ part of UK credit card business

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HSBC has sold part of its UK credit card book including Marbles, the online credit card business, for £385m.

The bank has sold 338,000 credit card accounts branded as Marbles and Beneficial to SAV Credit, a specialist lender founded in 2002 by Palamon Capital Partners, the private equity group.

SAV targets co-called “near-prime” customers who are rejected by mainstream banks.

It already has 150,000 credit card customers for its aqua Mastercard account and believes there are further opportunities in the UK to pick up loan books.

Marbles was launched in 1999 as one of the first UK online credit cards. In 2003 HSBC acquired Beneficial and Marbles as part of its acquisition of Household, the US consumer finance group.

The Beneficial credit card book is focused on people with poor or unusual credit records, though Marbles targets mainstream consumers.

HSBC said on Tuesday it was selling the credit card portfolio because it was non-core and it has developed its own branded credit card business in recent years.

The bank has also been expanding Marks and Spencer Money which it acquired in 2004.

HSBC is one of the top four card issuers in the UK with 10m cards and receivables of £8bn.

It is thought the loan book being sold has receivables – or loans outstanding – of about £350m-£450m and is being sold with a small premium on top.

HSBC’s move follows other banks, which have been selling off parts of their credit card books in the past year to improve profitability.

This year Barclays sold off part of its subprime credit card business to CompuCredit Corporation, a US credit card company, for about £390m.

The disposal was part of an attempt by Barclays to bolster profits at Barclaycard, the UK’s biggest credit card issuer where 2006 profits fell 40 per cent to £382m.

In the first few years of the decade, low interest rates meant that banks lent aggressively to consumers in the form of loans and credit cards and were seeing a return on assets of about 5-6 per cent.

However, in the past two years, banks have reined back on credit card lending because of rising bad debts as consumers have struggled to repay loans.

The SAV deal is being funded by a new debt facility from Royal Bank of Scotland and by SAV’s existing private equity partners, including Palamon, Electra Private Equity and Morgan Stanley Alternative Investment Partners.

Leigh Allen advised SAV Credit on the sale.

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