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ECONOMY | 09-04-2024 12:12

HSBC sells Argentina division to Banco Galicia for US$550 million

HSBC will sell its Argentina operation to Grupo Financiero Galicia for US$550 million, subject to price adjustments. Deal includes all of HSBC Argentina’s business, which ranges from banking to asset management and insurance, as well as US$100 million of subordinated debt.

Global bank HSBC has agreed to sell its Argentina division to financial services company Grupo Financiero Galicia for US$550 million as it focuses on core Asia operations, it confirmed on Tuesday.

The final price is subject to some price adjustments, read a statement. The deal includes all of HSBC Argentina’s business, which ranges from banking to asset management and insurance, as well as US$100 million of subordinated debt.

"This transaction is another important step in the execution of our strategy and enables us to focus our resources on higher value opportunities across our international network," Chief Executive Noel Quinn said in a statement.

The London-listed lender expects to take a US$1-billion pre-tax loss on the disposal in the first quarter, while the price is subject to adjustments depending on the performance of the business before the deal closes, it added.

"HSBC Argentina is largely a domestically focused business, with limited connectivity to the rest of our international network," Quinn said.

"Furthermore, given its size, it also generates substantial earnings volatility for the group when its results are translated into US dollars. Galicia is better placed to invest in and grow the business."

Argentina's economy is plagued by triple-digit annual inflation that stands at over 200 percent, and a highly volatile peso currency.

HSBC added Tuesday that following the deal's close, it would write off US$4.9 billion in historical foreign exchange losses, partly linked to the sharp devaluation of the peso announced late last year by President Javier Milei.

The Argentina unit has a network of more than 100 branches and employs 3,100 people. It has around one million customers and generated revenues last year totalling US$774 million. It made a profit before tax of US$239 million in 2023.

The impact of the transaction will be excluded from HSBC’s dividend payout calculation, which remains at 50 percent for 2024. It is expected to complete within the next 12 months.

Quinn said HSBC remained committed to its business in Mexico and the United States, and to serving international clients across its global network.

The bank's latest divestment comes after it concluded the sale last month of its Canadian operations to Royal Bank of Canada for US$10.1 billion, in a transaction first announced in late 2022.

In Europe, the lender sold its retail banking operations in France at the start of the year for an undisclosed amount to My Money Group, which is controlled by the US private equity fund Cerberus.

The lender is also exploring the sale of various businesses in Germany including its wealth-management, custody and fund administration units, people familiar with the matter told Bloomberg earlier this month.

The move is part of HSBC's strategy to simplify and refocus operations on its major region of Asia.

HSBC in February posted soaring annual profits thanks to ballooning global interest rates, but also revealed a massive impairment charge linked to property-sector woes in China. 

Its performance was rocked by a US$3-billion impairment linked to its 19 percent stake in China's Bank of Communications, which was hit by property loan write-offs.

The Argentina disposal is expected to be completed during the next 12 months, and remains subject to conditions including regulatory approvals.



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