Big US Cards Merger: Barclays US Cards Less Likely To Be Bid For

Capital One (COF US) buying Discover (DFS US) in USD 35.3bn all-share deal. Barely registers in EUR credit world but hope that a bidder for Barclays US cards & consumer business must have now dropped as these two will take time to bed down their deal.

• COF has a couple of small EUR credit lines, DFS has none but both have, historically been active in the European card markets, with only very limited success. The strategic rationale of merging two of the major US card businesses in-market is sound.
• What interests us is, in the search for growth in a relatively mature market, whether the hope that someone would buy Barclays’ US cards & consumer business has now changed. This business has been somewhat incongruous within the Barclays group and did not cover cost of capital in FY23.
• If Barclays’ had sold its US consumer business, we would have taken this as a credit positive, bringing more focus to the group, releasing capital to the parent and de-risking overall.