Barclays (BCS) to Sell US Credit Card Accounts to Blackstone
Barclays BCS has announced the sale of approximately $1.1 billion in credit card receivables to Blackstone’s BX Credit & Insurance segment. The transaction is still subject to certain conditions and is anticipated to be funded in the first quarter of 2024.
This agreement, marking the first step in Barclays' plan to optimize its risk-weighted assets (RWAs), aims to bolster lending capacity for Barclays Bank Delaware (“BBDE”) in the United States. The company also seeks to streamline its balance sheet, reduce risk exposure and fuel further lending activities.
The sale, facilitated by BBDE's forward flow sale and servicing arrangement with BX, underscores Barclays' commitment to leveraging strategic partnerships to execute risk transfer agreements. By offloading a portion of its credit card portfolio, the company anticipates a release of almost £1.0 billion in RWAs, a move aligned with its broader strategy to prioritize consumer lending growth.
Maintaining legal ownership of the credit card accounts while outsourcing servicing to Blackstone allows Barclays to retain a revenue stream through servicing fees. Further, BCS’ investment in the transaction alongside Blackstone's insurance accounts solidifies the partnership and underscores confidence in the deal's potential benefits.
For Barclays, this transaction represents more than just a balance sheet optimization effort—it's a strategic shift toward fortifying its lending capacity while mitigating risk. The collaboration with Blackstone signifies Barclays' commitment to tapping into efficient capital solutions in asset-based finance markets.
Moreover, the timing of this deal aligns with Barclays' recent announcement to reevaluate the allocation of RWAs across its various business segments. With a projected increase in RWAs, particularly in the U.S. consumer bank, the company aims to navigate regulatory requirements while driving growth.
Additionally, this strategic move positions Barclays for sustainable growth and underscores its commitment to delivering value to shareholders and customers alike.
Earlier this month, along with the 2023 financial results, BCS announced a major strategic overhaul, including segment reorganization effective from the first quarter of 2024. The company further came up with medium-term financial targets and guidance.
Additionally, BCS plans to return at least £10 billion of capital to shareholders between 2024 and 2026 through dividends and share buybacks, with a continued preference for buybacks.
Barclays is also making a significant move in the U.K. retail banking space. The company announced a deal to acquire Tesco's retail banking business for £600 million. This partnership with Tesco, the U.K.’s largest retailer, not only marks a key opportunity for the company to further its retail banking ambitions but also signifies a new chapter in expanding its customer base and distribution channels.
Further, Barclays is eyeing Societe Generale’s SCGLY U.K. private bank. Per a Reuters report, citing people familiar with the matter, BCS is in the early stages of considering a bid. The bank’s move to bid for SCGLY’s British private bank would complement the above-mentioned business overhaul strategy.
Over the past six months, shares of Barclays have gained 14.6% compared with the industry’s rally of 7.9%.
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Currently, BCS carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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