Barclays and Blackstone Credit & Insurance Agree to Sale of Credit Card Receivables

Rhea-AI Summary

Barclays PLC and Blackstone Credit & Insurance announce a $1.1 billion credit card receivables sale agreement to reduce risk-weighted assets and enhance lending capacity for Barclays Bank Delaware. The transaction involves a forward flow sale and servicing arrangement with Blackstone's insurance clients, expected to fund in Q1 2024. Barclays plans to release approximately GBP£1.0 billion of RWAs post internal ratings-based approach, benefiting its lending activities.

Insights

Financial Analyst

The sale of approximately US$1.1 billion in credit card receivables by Barclays Bank Delaware to Blackstone Credit & Insurance represents a significant transaction within the financial services industry, particularly in the asset-based finance market. The strategic forward flow sale and servicing arrangement indicates a shift in Barclays' approach to managing its risk-weighted assets (RWAs). By offloading these receivables, Barclays aims to streamline its balance sheet and optimize capital allocation, potentially improving its capital adequacy ratios. This move is reflective of a broader trend among banks to divest non-core assets and focus on strategic growth areas. The expected release of approximately GBP£1.0 billion of RWAs post-transaction could enhance Barclays' lending capacity and financial flexibility, which is particularly relevant as financial institutions navigate the challenging interest rate environment.

For stakeholders, the short-term implications include a more efficient capital structure and the potential for improved return on equity (ROE) due to the reduction in RWAs. Long-term benefits could include a stronger financial position for Barclays, enabling it to pursue growth opportunities more aggressively. However, the servicing arrangement will require ongoing operational excellence to maintain customer satisfaction levels. It is also important to monitor the performance of the sold receivables, as any deterioration could impact future arrangements and the reputation of both Barclays and Blackstone.

Market Research Analyst

The partnership between Barclays and Blackstone is indicative of the growing trend of collaboration between traditional banks and alternative asset managers. This transaction showcases the increasing role of insurance accounts and asset-based finance groups in providing capital solutions to banks. Blackstone's involvement underscores the attractiveness of credit card receivables as an investment for insurance clients, seeking diversified and stable returns. The strategic nature of this transaction suggests that both parties are committed to a long-term relationship, which could set a precedent for similar deals in the industry.

For investors and market observers, this deal provides insights into the evolving dynamics of the consumer credit market. It also highlights the strategic priorities of Barclays in the U.S., which include focusing on core operations and growth areas while managing regulatory capital requirements. The arrangement could serve as a model for other financial institutions looking to manage their asset portfolios more effectively. Market participants will likely watch closely to see how this partnership evolves and whether it leads to further industry consolidation or strategic alliances.

Legal Expert

The legal structure of the transaction, with Barclays Bank Delaware retaining legal title and continuing to service the accounts for a fee, is a common arrangement in asset sales, designed to mitigate disruptions for cardmembers. This structure allows for continuity of service while transferring the economic benefits of the receivables to Blackstone's insurance clients. The involvement of Barclays Bank PLC as an investor alongside Blackstone indicates a vested interest in the success of the transaction, which could have implications for the governance and oversight of the servicing arrangement.

From a regulatory perspective, the transaction's subject to notification to and possible review by the Prudential Regulation Authority underlines the importance of compliance with regulatory capital requirements. This transaction also illustrates the intricate interplay between risk management, regulatory compliance and strategic financial planning. The role of Barclays Investment Bank as the exclusive structuring advisor, risk retainer and liquidity facility provider raises considerations regarding potential conflicts of interest and the need for robust internal controls to manage these risks.

LONDON & NEW YORK--(BUSINESS WIRE)-- Barclays PLC ("Barclays") and Blackstone Credit & Insurance (“Blackstone”) today announced that Barclays Bank Delaware ("BBDE") has entered into an agreement with insurance accounts managed by Blackstone’s Asset Based Finance group, to sell approximately US$1.1 billion of currently outstanding credit card receivables (the “Transaction”) in relation to a defined set of Barclays-branded credit card accounts in the United States of America (the “Accounts”). This is the first in a series of activities Barclays plans to conduct to reduce its risk-weighted assets (RWAs) and create additional lending capacity for BBDE.

As part of the Transaction, BBDE will enter into a long-term strategic forward flow sale and servicing arrangement with Blackstone related to the Accounts. Blackstone’s investment will be made entirely on behalf of the firm’s insurance clients.

The Transaction remains subject to certain conditions and is expected to fund in Q1 2024.

Under the terms of the Transaction, BBDE will retain legal title in respect of the Accounts and BBDE will continue to service the Accounts for a fee. Barclays Bank PLC will invest into the Transaction alongside Blackstone’s insurance accounts.

The Transaction is expected to release approximately GBP£1.0 billion of RWAs on a post internal ratings-based (IRB) approach basis at the Barclays Group consolidated level⁽¹⁾. BBDE intends to use the proceeds of the sale to fund its lending activities.

Barclays Bank PLC, acting through its Investment Bank, served as exclusive structuring advisor to Blackstone in the transaction, to which it also served as risk retainer and liquidity facility provider.

Anna Cross, Group Finance Director at Barclays, said: “During our Investor Update, we said that we would leverage strategic partnerships to execute risk transfer agreements to reduce capital requirements. I am delighted to announce this first agreement in our US cards book.”

“We’re pleased to partner with an industry leader like Blackstone on this transaction that will help fund lending activities and support the long-term growth ambitions for our US Consumer Bank,” said Denny Nealon, CEO of Barclays US Consumer Bank and BBDE. “BBDE will continue to service the accounts, providing cardmembers with the high-level of service they have come to expect.”

Robert Horn, Global Head of Infrastructure & Asset Based Credit at Blackstone, said: “This collaboration demonstrates how we are supporting leading financial institutions with large-scale, long-term, efficient capital solutions in the asset based finance markets. Barclays has a premiere franchise in structured products and consumer banking and we look forward to working with them in the coming years to grow the partnership.”

(1) Subject to notification to and possible review by the Prudential Regulation Authority; the term “Barclays Group” refers to Barclays PLC together with its subsidiaries.

About Barclays

Our vision is to be the UK-centred leader in global finance. We are a diversified bank with comprehensive UK consumer, corporate and wealth and private banking franchises, a leading investment bank and a strong, specialist US consumer bank. Through these five divisions, we are working together for a better financial future for our customers, clients and communities. For further information about Barclays, please visit our website home.barclays

About Blackstone

Blackstone is the world’s largest alternative asset manager. We seek to deliver compelling returns for institutional and individual investors by strengthening the companies in which we invest. Our more than $1 trillion in assets under management include global investment strategies focused on real estate, private equity, infrastructure, life sciences, growth equity, credit, real assets, secondaries and hedge funds. Further information is available at www.blackstone.com. Follow @blackstone on LinkedIn, X (Twitter), and Instagram.

Forward-looking statements

This announcement contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to the Barclays Group. Barclays cautions readers that no forward-looking statement is a guarantee of future performance and that actual results or other financial condition or performance measures could differ materially from those contained in the forward-looking statements. Forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as ‘may’, ‘will’, ‘seek’, ‘continue’, ‘aim’, ‘anticipate’, ‘target’, ‘projected’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’, ‘achieve’ or other words of similar meaning. Forward-looking statements are based on the current beliefs and expectations of Barclays’ directors, officers and employees and are subject to significant risks and uncertainties. Actual outcomes may differ materially from those expressed in the forward-looking statements. In setting its targets and outlook for the period 2024-2026, Barclays has made certain assumptions about the macro-economic environment, including, without limitation, inflation, interest and unemployment rates, the different markets and competitive conditions in which Barclays operates, and its ability to grow certain businesses and achieve costs savings and other structural actions. Additional risks and factors which may impact the Barclays Group’s future financial condition and performance are identified in Barclays PLC’s filings with the US Securities Exchange Commission (“SEC”) (including, without limitation, Barclays PLC’s Annual Report on Form 20-F for the financial year ended 31 December 2023 which is available on the SEC’s website at www.sec.gov). Subject to Barclays’ obligations under the applicable laws and regulations of any relevant jurisdiction (including, without limitation, the UK and the US), in relation to disclosure and ongoing information, Barclays undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240227040694/en/

For further information, please contact:

Barclays

Marina Shchukina, Investor Relations

+44 (0) 7385 142 673

Jon Tracey, Media Relations (U.K.)

+44 (0)755 221 4868

Matthew Fields, Media Relations (U.S.)

+1 302 255 7807

Matthew.Fields@barclays.com

Blackstone

Kate Holderness

+1 917 318 6818

Source: Barclays PLC

FAQ

What is the value of the credit card receivables sale agreement announced by Barclays and Blackstone?

Barclays and Blackstone announced a $1.1 billion credit card receivables sale agreement.

When is the transaction expected to fund?

The transaction is expected to fund in Q1 2024.

How much risk-weighted assets (RWAs) does Barclays plan to release post internal ratings-based approach?

Barclays plans to release approximately GBP£1.0 billion of RWAs post internal ratings-based approach.

Who will be investing alongside Blackstone's insurance accounts in the transaction?

Barclays Bank PLC will invest alongside Blackstone's insurance accounts in the transaction.

What role did Barclays Bank PLC play in the transaction?

Barclays Bank PLC served as exclusive structuring advisor, risk retainer, and liquidity facility provider in the transaction.