Barclays CEO Jes Staley was left a single ace by his ousted predecessor: Barclaycard.
The British bank's credit card operation produced a return on tangible equity of 22 percent last year -- almost four times more than the bank as a whole.
The smartest move for Staley could now be to sell it.
Barclaycard, once run by former Barclays chief Antony Jenkins, generated 1.6 billion pounds ($2.3 billion) of pretax profit last year, a 22 percent increase on the year-earlier period and just under a quarter of the company's total profit.
Loan losses and costs as a proportion of income are falling, and customer numbers have climbed more than two thirds since 2009.
Given that record, a sale or a spin-off could attract a healthy valuation. Worldpay, Royal Bank of Scotland's former payments arm, was valued at more than 16 times earnings when it went public last year. Apply that multiple to Barclaycard and it could have a market capitalization greater than 26 billion pounds -- more than Barclays as a whole.
There are big risks looming that make the case to sell sooner rather later more compelling. Nimble fintech startups are a threat to much of the payments industry, and a bigger challenge may come from another source: China.
Alipay and Tenpay -- two of the country's leading payment apps launched by internet behemoths Alibaba and Tencent -- have made large strides. Many of the country's urban young pay for everything without ever touching cash. Alipay -- controlled by Alibaba's billionaire founder Jack MA -- now has 450 million registered users, and processes more than 175 million transactions a day.
Alipay and Tenpay control almost 70 percent of China's market for third-party online payments, a market that has been soaring in recent years, according to iResearch.
These Chinese challengers are now following their country's tourists overseas: Alipay has struck partnerships with firms in Germany and India, where it is the biggest investor in the country's top mobile payments firm, Paytm. It now plans to open in Europe.
Once the Chinese arrive, the business will get tougher for Western payment providers. Credit card customers can be sticky but an aggressive Chinese competitor would steal market share and squeeze margins.
Barclays has already decided to sell Africa -- a business it previously deemed as core -- because it doesn't have an adequate overlap with its U.K. consumer unit and transatlantic-focused investment bank.
Increasingly, that argument could also be applied to Barclaycard. Sure, it's the biggest player in the U.K. and overlaps with Barclays's consumer bank there, but most of Barclaycard's recent growth has come from abroad.
U.K. consumer cards make up about a third of Barclaycard's global total, down from more than half in 2009. Barclaycard now has more customers in the U.S. than in the U.K. The number of U.S. cards more than doubled between 2009 and September 2015 to 13.3 million. Meanwhile, the number of cards in Britain increased just 13 percent to 11.1 million.
Even at a significantly lower multiple than investors gave Worldpay, a Barclaycard spin off would look compelling. It would surely draw a higher valuation than the investment bank -- still reeling from the financial crisis -- and the African unit, which has been buffeted by the turmoil in emerging markets.
It would take a brave decision on Staley's part -- but investors are supposed to sell at the top.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
To contact the editor responsible for this story:
Edward Evans at firstname.lastname@example.org