HSBC to sell Argentine business to Grupo Financiero Galicia for $550m

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HSBC Latin America B.V., a subsidiary of HSBC Holdings plc, has finalized the sale of its Argentine operations to Grupo Financiero Galicia, marking a significant transaction in the banking sector.

The deal, valued at $550 million, involves the complete transfer of HSBC’s Argentine business, including banking, asset management, and insurance sectors, along with $100 million of subordinated debt. The agreement, subject to regulatory approvals, is poised to close within the next 12 months. HSBC expects the consideration to be a mix of cash, loan notes, and American Depositary Receipts (ADRs) from Galicia.

This strategic move aligns with HSBC’s broader agenda to concentrate on higher-value opportunities globally. “We are pleased to agree to the sale of HSBC Argentina. This transaction is another important step in the execution of our strategy,” stated Noel Quinn, HSBC Group Chief Executive. He emphasized that the sale allows HSBC to focus on markets with greater connectivity and potential for the group.

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The transaction is expected to result in a pre-tax loss of $1 billion for HSBC in the first quarter of 2024, primarily from reclassifying the business as held for sale. However, it will have a negligible impact on HSBC’s CET1 ratio—a key measure of bank solvency—owing to balanced adjustments in risk-weighted assets (RWAs).

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Moreover, HSBC will recognize approximately $4.9 billion in historical foreign currency translation reserve losses at the closing. These losses, accumulated over years due to the fluctuating Argentine peso, have already been accounted for in the capital and will not affect the CET1 or tangible net asset value further.

Despite these financial nuances, the deal is deemed a material notable item and will be excluded from HSBC’s dividend payout calculation. HSBC maintains its dividend payout target at 50% for 2024, excluding notable items.

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HSBC Argentina operates over 100 branches with roughly 3,100 employees, serving around one million customers. In 2023, it reported revenues of $774 million and a pre-tax profit of $239 million. As of February 2024, HSBC Argentina held total assets worth $4.7 billion.

This divestiture by HSBC reflects a strategic recalibration towards more lucrative and interconnected markets. Grupo Financiero Galicia’s acquisition is likely to strengthen its presence in Argentina, offering an opportunity to further invest in and expand the local financial services landscape.

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