▲ HSBC｜HSBC sells Argentina business for approximately HK$4.7 billion and records pre-tax loss on sale of US$1 billion
- HSBC sells all Argentina businesses, including banking, asset management and insurance
- The acquirer is Argentina’s largest private financial group GRUPO FINANCIERO GALICIA, with a consideration of US$550 million.
- It is expected that a pre-tax loss on sales of approximately US$1 billion will be recognized in the first quarter of this year.
HSBC （00005）
Announced that it agreed to sell its Argentinian business to GRUPO FINANCIERO GALICIA, Argentina’s largest private financial group, for a consideration of US$550 million (approximately HK$4.307 billion). HSBC expects to recognize a pre-tax loss on sales of US$1 billion in the first quarter of this year. As the transaction will be regarded as a major special item and will not be included in the calculation of dividend payout, HSBC’s target dividend payout ratio this year remains 50%.
The transaction is subject to conditions including regulatory approvals and is expected to close within the next 12 months. HSBC stated that the historical cumulative currency translation reserve loss of approximately US$4.9 billion at the time of delivery will be recognized in the income statement, but it is believed to have little impact on the group’s common equity tier 1 capital ratio.
Consideration comprised cash, loan notes and Galicia ADRs
The announcement stated that GALICIA will acquire all businesses of HSBC Argentina, including banking, asset management and insurance, as well as US$100 million of subordinated debt issued by HSBC Argentina and held by other HSBC entities for a consideration of US$550 million. The consideration will be based on The results of the business and the fair value gains and losses of HSBC Argentina’s securities portfolio from December 31, 2023 to the time of closing are adjusted.
HSBC expects to receive the acquisition consideration in cash, loan notes and Galicia’s American depositary receipts, with the American depositary receipts accounting for approximately half of the consideration received and accounting for less than 10% of Galicia’s economic interest.
Qi Yaonian: HSBC Argentina has limited connectivity to the rest of the international network
HSBC Group Chief Executive Officer Chris Clement said: “This transaction is another important step in the execution of our strategy and allows us to focus our resources on higher value opportunities across our international network.” HSBC Argentina is a primarily domestically focused business with limited connectivity to the rest of the group’s international network. In addition, given its size, its results also create huge earnings swings for the group when converted into U.S. dollars.
Qi Yaonian pointed out that Galicia is more suitable to invest in and develop HSBC Argentina. He noted that the group remains committed to Mexico and the United States and serves international clients through its global network and leading transaction banking capabilities.
HSBC Argentina consists of more than 100 branches, approximately 3,100 employees, and serves approximately 1 million customers. In 2023, HSBC Argentina recorded revenue of US$774 million, recognized expected credit loss expenses of US$107 million, and generated pre-tax profits of US$239 million. As of the end of February 2024, HSBC Argentina’s total assets were US$4.7 billion, risk-weighted assets were US$7.9 billion, and equity capital was US$1.4 billion.
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