HSBC to sell Argentina business for $550 mln, to clock a loss on sale

Investing.com-- HSBC Holdings PLC (LON:HSBA) said on Tuesday that it will sell its Argentina business to private financial group Grupo Financiero Galicia (NASDAQ:GGAL) for $550 million, and that the bank will clock a $1 billion pre-tax loss on the disposal.

HBSC’s Latin American unit had entered a binding agreement with Galicia for the deal, the bank said in a statement to the Hong Kong Stock Exchange. 

HSBC said it will clock a $1 billion pre-tax loss in the first quarter of 2024 after the disposal, and that after the closing of the transaction, the bank will recognize at least $4.9 billion of historical cumulative foreign currency translation reserve losses. 

The sale is also expected to reduce HSBC’s CET1 ratio by 0.1 percentage points in Q1. Still, the bank said its dividend payout ratio target remains unchanged at 50% for 2024. 

The move comes as an extension of HSBC’s efforts to streamline its business and focus more on its key Asian and European markets. The bank had recently completed the sale of its Canadian operations to RBC. 

The sale also comes at the heels of a massive restructuring in HSBC, which saw the bank turn profitable after years of laggard growth. 

But an exit from Argentina also comes amid persistent upheaval in the Latin American country, which has been long struggling with a severely depreciated peso, heightened government debt and periods of political unrest. 

Argentina’s recently-elected President Javier Gerardo Milei also outlined seemingly radical reforms for the country’s economy, which were met with skepticism by foreign investors. 

“HSBC Argentina is largely a domestically focused business, with limited connectivity to the rest of our international network. 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,” HSBC said in a statement. 

HSBC said it expects to receive the consideration for the sale in a combination of cash, loan notes, and Galicia’s American Depository Receipts. 

HSBC's Hong Kong shares (HK:0005) rose 1.1%, outpacing a 0.5% increase in the Hang Seng index.

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