Discover CFO: Interested In Private-Label Card Business
22 May 2012 - 8:16AM
Dow Jones News
Discover Financial Services (DFS) is interested in getting into
the private-label credit-card business, Chief Financial Officer
Mark Graf said, noting the lender "took a look" at HSBC Holdings
PLC's (HBC) U.S. card business.
Graf, speaking at a Deutsche Bank conference in New York, said
Discover likes the private-label business, in which lenders issue
credit cards on behalf of retailers and other partners, and would
"like to find an entree" in to the business.
There were "bits and pieces" of HSBC's U.S. card business that
were "intriguing" to Discover, Graf said in response to an audience
member's question, according to a webcast. He did not say whether
Discover formally bid on the business, which was ultimately
acquired by Capital One Financial Corp. (COF) in a deal completed
earlier this month.
Discover representatives did not immediately respond for
requests for comment late Monday.
Several banks have increased their focus on private-label card
lending, which fell out of favor with many banks during the
recession. Citigroup Inc. (C), one of the largest players in the
business, originally intended to sell a $40 billion portfolio of
cards issued for retailers and other partners but decided to keep
the business last year.
HSBC's U.S. card business includes about $28 billion of loans, a
large portion of which are private-label cards, making Capital One
the third-largest issuer of such cards.
Private-label cards are considered riskier than general purpose
cards because they are often issued to consumers with lower credit
scores and see higher delinquencies and loss rates during a tough
economy.
Discover, the sixth-largest credit-card lender by spending, has
been trying to expand beyond traditional card lending in recent
years, adding student loans and private loans. It also intends to
originate mortgages once it completes the acquisition of mortgage
assets from online-lending platform Tree.com Inc. (TREE).
Discover's shares were down 0.7% at $32.30 in after-hours
trading Monday after closing up 3.1% at $32.51.
-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214;
andrew.r.johnson@dowjones.com
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