Barclays PLC's acquisition of a $3.8 billion U.S. credit card portfolio will help bolster revenues at a time when income is under pressure.
The U.K. bank agreed to acquire a portfolio of U.S. co-branded and private-label credit card accounts and receivables issued in partnership with apparel retail company The Gap Inc. from Synchrony Bank, a unit of Synchrony Financial.
The acquisition is part of the British lender's wider strategy to pursue further credit card partnerships in the U.S., which also helps boost the group's income amid a low interest rate environment. Barclays' 2020 net interest income dropped to £8.12 billion, from £9.41 billion in 2019.
The deal comprised roughly $3.8 billion of average receivables as at June. Under the terms of the agreement, as at June the consideration for the portfolio would have been about $3.90 billion. The deal value as a percentage of net receivables is 102.63%, according to S&P Global Market Intelligence.
The bank's consumer, cards and payments business swung to an attributable profit of £218 million in the second quarter from a year-ago loss of £226 million, amid a recovery in consumer spending as lockdowns eased in its home market and the U.S.
The consumer, cards and payments business contributed £919 million to the group's net interest income of £3.90 billion in the first half. The group's net fee and commission income totaled £3.71 billion in the six-month period, of which £2.85 billion came from the business.
In 2020, Barclays struck a multiyear agreement for a card program relationship with the American Association of Retired Persons, or AARP, and launched a new suite of Emirates Skywards-branded cards as part of a new U.S.-focused partnership with aviation company The Emirates Group.
More recently, Barclays also renewed its long-term partnership with JetBlue Airways Corp. It has been the exclusive issuer of the airline's co-branded credit card program in the U.S. since 2016.
Barclays said U.K. debit and credit card spend was up 11% in June, compared to the same month in 2019, while U.S. card spend has "almost recovered" to 2019 levels.
"I think the credit card industry does have the characteristics of interchange fees in the U.S. as well as the robust reward programs, and we're seeing a much more rapid recovery in balances there," CEO Jes Staley said during the group's second-quarter earnings call.
"So I think you should look forward to the U.S. card business recovering to historic levels in terms of activity." He said it may be a "slightly different story" in the U.K.
Barclays will purchase the Gap portfolio through U.S. unit Barclays Bank Delaware. The transaction is expected to complete in the second quarter of 2022. Upon completion, Barclays said the deal is expected to reduce its common equity Tier 1 ratio as of June 30 by approximately 20 basis points.