HSBC to sell Brazilian unit to Banco Bradesco for $5.2 bn
03 Aug 2015
HSBC is selling its operations in Brazil to Banco Bradesco of Brazil for 17.6 billion reais, or $5.2 billion.
The price was worked on the basis of HSBC Brazil's shareholder equity of 11.6 billion reais at the end of last year.
This will be adjusted in line with changes in the figure between now and the closing of the deal, Bradesco disclosed yesterday.
The acquisition had been rumoured for weeks, and the the deal price was significantly higher than the 12 billion reais often mentioned in Brazilian media reports.
Brazil's banking sector had proved extremely resilient as the economy faced a recession, with inflation weakening the country's currency. The lender announced last week that it earned 4.5 billion reais in the second quarter, its best quarterly results ever.
HSBC had had a presence in the country since 1997 and expanded further in the country in 2003 with the acquisition of Lloyds' Brazil unit.
The UK banking group, however, had not, been able make a success of its operations in the country.
HSBC reported losses of $247 million in Brazil last year, even as a number of its larger rivals in the country, including Bradesco, posted record profits.
The New York Times quoted Andre Riva Gargiulo, banking sector analyst for São Paolo a brokerage firm GBM, ''HSBC has been having problems with consumer debt. They've had high default rates,'' reported.
According to Gargiulo that scale was crucial in Brazil's retail banking sector, where HSBC had been trying to compete.
The local operations of the lender, counted as the country's sixth largest, as measured by assets, but were less than a third the size of the fifth largest, Santander's Brazil unit and less than a fifth the the size of Bradesco, the country's fourth-largest bank.
Bradesco's statement yesterday referred to the ''gain in scale'' from the deal.
''Bradesco will take over all operations of HSBC in Brazil, including retail, insurance and asset management, as well as all the branches and clients,'' the statement said.