The move is part of Barclays' strategy to reduce assets on its balance sheet ahead of stricter regulatory requirements. It also highlights the increasing involvement of major private capital firms such as Blackstone in mainstream debt markets, where they face fewer regulatory constraints compared to traditional banks.
Under the deal, Blackstone's credit and insurance division will purchase the US credit card receivables from Barclays for an undisclosed amount, with Barclays retaining the servicing of the accounts for a fee. This sale is anticipated to kickstart a series of transactions aimed at trimming the bank's risk-weighted assets.
Barclays' decision comes shortly after its CEO outlined a revised strategic direction for the bank, aiming to return GBP 10 billion to shareholders through dividends and share buybacks, contingent upon a nearly 20 per cent revenue boost over the next three years. To achieve this, Barclays is counting on the US consumer market, targeting a USD 8 billion surge in US credit card lending over the same period. Offloading existing debt to Blackstone enables Barclays to expand its lending capacity without increasing its capital requirements or risk exposure.
According to the Financial Times, in the US market, Barclays operates through partnerships, offering co-branded credit cards for 20 companies, including The Gap, JetBlue Airways, and the AARP. With USD 32 billion in net receivables and an annual income of USD 3.3 billion, Barclays faces a GBP 16 billion rise in US card risk-weighted assets as it transitions to an 'internal ratings-based' model mandated by UK regulators. The sale to Blackstone is part of a strategic move to counterbalance this increase in risk-weighted assets.
Barclays envisions a lasting strategic alliance with Blackstone, potentially leading to further asset sales down the line. While Barclays is extending credit facilities to Blackstone for managing daily working capital, it will not provide seller financing, according to the Financial Times.
Since the collapse of several US regional lenders in March 2023, Blackstone has been acquiring assets from banks and managing them on behalf of its credit and insurance clients. Apart from credit card debts, Blackstone has acquired home improvement loans, auto loans, and loans financing rooftop solar power installations.
Blackstone officials indicated that the firm could serve as a valuable partner for banks seeking to offload assets. Unlike competitors such as Apollo Global and KKR, which own large insurers, Blackstone manages assets on behalf of insurers like Allstate and AIG.
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