Discover CFO: Interested In Private-Label Card Business

05/21/2012| 06:02pm US/Eastern

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   By Andrew R. Johnson 
   Of  
 

Discover Financial Services (>> Discover Financial Services) 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. (>> Capital One Financial Corp.) 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. (>> Citigroup Inc.), 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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