In something of a surprise turn, GE once again is indicating that it is considering the sale of its private label credit card portfolios. Such a move was considered in 2008, but proved unfeasible as the credit card industry grappled with the recession and the spike in card delinquencies and charge-offs. Private-label issuers have since stabilized their programs, and now firms are once again evaluating the business opportunities. From a Wall Street Journal blog post:
Citi put its $40 billion retail card business in its so-called bad bank unit a few years ago with intentions of selling the portfolio. Last year it scrapped that plan, reincorporating the operation into its main business and stating it sees opportunity to grow its partnerships.
Wells Fargo has said it’s interested in the business, as has Discover Financial Services, whose CFO last month said it was interested in HSBC’s U.S. card business, which Capital One ultimately scooped up for a $2.5 billion premium. A significant portion of HSBC’s nearly $30 billion portfolio were private-label cards.
The PLCC segment continues to experience major swings in issuer sentiment. It remains a critical source of consumer and retailer credit, and portfolio sales create opportunities for issuers to build assets quickly. However, its potentially higher credit risk portfolios can create challenges in times of economic distress.
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