HSBC confirms possible sale of Brazil unit

23 May 2015

British banking giant HSBC Plc has confirmed that it may sell its loss-making Brazilian operations, in which Spanish bank Banco Santander SA's Brazilian unit has indicated interest.

''HSBC confirms that it is exploring various strategic options for its operations in Brazil, including the potential sale thereof,'' the British bank said in brief news release yesterday.

Addressing a press conference Tuesday, Banco Santander (Brazil) SA's chief executive Jesús Zabalza said, ''We can't speak for HSBC Brazil, but there's a very initial process for the sale of the bank (in Brazil) that we're going to analyze.''

''We haven't made an offer, we haven't even opened a data room for this operation,'' he further stated.

Earlier in February, London-based HSBC said that its four problem businesses -Brazil, Mexico, Turkey and the US need be improved or sold.

For the year 2014, HSBC Bank Brazil SA reported operating loss of $311 million compared with $169 million operating profit in the previous year. Return on equity was a negative 4.2 per cent, down from 3.6 per cent in 2013.

Operating income for the year was down 5 per cent at $3.51 billion from $3.68 billion in the previous year.

The bank is Brazil's seventh-largest having presence in 531 municipalities covering all the country's regions with a network of 853 agencies, 452 banking service points and 4,728 ATMs. It has around 20,500 employees.

Last month, The Wall Street Journal reported that the British bank has hired advisors to sell a large chunk of its Brazilian operations to prospective buyers, citing sources.

Last week, Reuters reported that HSBC is likely to select a preferred bidder for the troubled unit as early as next month. Citing sources, the agency said the bids may not be higher than the book value of the units which is around $3.3 billion.

Other banks interested in the HSBC Brazil business include Banco Bradesco, BTG Pactual, Canada's Bank of Nova Scotia and China's ICBC.

''At present no decision has been made to proceed with any transaction and HSBC will make a further statement if or when appropriate,'' HSBC said.

Meanwhile, HSBC got some relief yesterday when US court of appeals reversed a 2013 judgment by Illinois district court which had imposed a $2.46-billion penalty on HSBC in a class action law suit (See: US court orders HSBC to pay investors $2.5 bn over securities fraud).

It was alleged that HSBC's Household International mortgage lending business, which the bank acquired in 2003, violated federal security laws and misled investors about its lending practices and quality of its home loans.

HSBC argued that the lawsuit, which dates back to 2009, was defective and should be reversed, and the appeals court has now awarded a new trial on the case.