Adios Argentina: HSBC Divests Banking Operations In Argentina For $550M

Zinger Key Points
  • HSBC Latin America B.V. agrees to sell Argentina business to Grupo Financiero Galicia for $550 million.
  • Post closure, HSBC expects $1.0 billion pre-tax loss, $4.9 billion in historical foreign currency translation reserve losses.

HSBC Holdings plc’s HSBC wholly-owned subsidiary, HSBC Latin America B.V., inked a binding agreement to sell its business in Argentina to Grupo Financiero Galicia GGAL.

As per the terms, Galicia will acquire all of the bank’s Argentina business covering banking, asset management, and insurance, together with $100 million of subordinated debt for a consideration of $550 million.

HSBC anticipates receiving the purchase consideration in a combination of cash, loan notes, and Galicia’s American Depositary Receipts (ADRs), with ADRs accounting for around half of the consideration received and representing less than a 10% economic interest in Galicia. 

The bank expects a $1.0 billion pre-tax loss upon reclassification of the business as held for sale in the first quarter of 2024. 

Post closure, HSBC expects the recognition of $4.9 billion in historical foreign currency translation reserve losses.

HSBC reiterated the dividend payout ratio target at 50% for 2024 and continues to expect a return on average tangible equity in the mid-teens for 2024.

The transaction is expected to be completed within the next 12 months, subject to conditions, including regulatory approvals. 

Noel Quinn, Group Chief Executive, said, “We are pleased to agree the sale of HSBC Argentina. 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.” 

“We remain committed to Mexico and the US, and to serving our international clients throughout our global network with our leading transaction banking capabilities.”

Last month, HSBC launched a $150 million Venture Debt offering in Singapore alongside a $1 billion ASEAN Growth Fund.

Investors can gain exposure to the stock via Themes Global Systemically Important Banks ETF GSIB and Avantis International Large Cap Value ETF AVIV.

In February, HSBC reported fourth-quarter revenue that declined 11% Y/Y to $13.021 billion as NII fell 7% Y/Y to $8.28 billion, impacted by notable items of $(2.7) billion booked in the quarter.

Price Action: HSBC shares are up 0.49% at $41.21 premarket on the last check Tuesday.

Image: Shutterstock/ sylv1rob1

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