The financial institution HSBC, which is based in the United Kingdom, has agreed to sell its business in Argentina.
Grupo Financiero Galicia will become the new owner of the mentioned business. The cost of this deal will be $550 million. The relevant information was published on Tuesday, April 9, by the United Kingdom-based bank. Grupo Financiero Galicia is the largest private financial group in Argentina.
HSBC is currently implementing a project to review its operations at the global level. As part of the changes to the business concept, the financial institution is focusing on the development and scaling of its functional presence in Asia, perceiving this region as one of the most important geographical areas of activity. The revision of the bank’s operation strategy began in 2021. As part of the relevant moves, the financial institution also made decisions to wound down its business in the United States and France.
HSBC CEO Noel Quinn stated that the sale of a unit bank in Argentina is another important decision in the framework of the business concept review. Also in this context, it was noted that the discontinuation of business in certain countries would allow a financial institution to focus resources on more profitable opportunities within its international network.
The implementation of the deal in Argentina is expected to result in a $1 billion pre-tax loss for HSBC in the first quarter of the current year. The relevant information is contained in the official statement of the financial institution.
Noel Quinn says that HSBC Argentina is a business primarily focused on the domestic market. He also noted that the interaction of this unit with the rest of the international functional network of a financial institution is limited. Noel Quinn separately stated that HSBC Argentina is a source of significant revenue volatility for the bank. According to him, Grupo Financiero Galicia is currently in a better position to invest and develop its business.
The news of the sale of the bank’s Argentine unit did not affect the cost of its shares in early trading in London. At the same time, in Hong Kong, against the background of this information, the securities of the financial institution rose by 1.1%.
Gary Greenwood, an analyst at Shore Capital, says that Argentina has been a problematic market for HSBC in recent years. In this context, the expert mentioned such negative circumstances of the mentioned country’s economic environment as hyperinflation and a sharp devaluation of the national currency. According to the financial institution, in 2023, its losses grew by $1.8 billion due to the weakening of the Argentine peso.
It is worth noting that HSBC’s business in Asia nowadays is not an example of an absolutely successful activity that is not related to any problems. Currently, the operation of the financial institution in China is in the zone of negative impact of the complex situation in the economy of this country. The main source of difficulties is the crisis in the Chinese real estate sector, which has turned out to be deeper and longer than initially expected.
In February, HSBC reported a significant drop in quarterly profit after the share of this financial institution in China’s Bank of Communications (BoCom) decreased by $3 billion. In this case, other expenses of the lender related to problems in the economic system of the Asian country also became a factor of negative impact.
The financial institution, based in the United Kingdom and focused on activities in Asia, reported that its profit for the last three months of 2023 before taxes fell by 80% compared with the result for the same period in 2022.
In February, it also became known that HSBC made provisions for $3.4 billion to cover expected credit losses and other expenses related to the bank’s involvement in the real estate sector of mainland China.
Matt Britzman, the stock market analyst at Hargreaves Lansdown, said that the problems of a financial institution in the mentioned country in terms of the impact on performance, in general, are more or less in line with preliminary expectations. The expert noted that the trend of the crisis in the Chinese real estate sector continues.
At the same time, HSBC remains optimistic about the prospects for China’s economic system. The chairman of the financial institution, Mark Tucker, said that the recovery of the Asian country’s economy after the abolition of the zero-tolerance policy for coronavirus was rapid, mentioning in this context an increase of about 5% in 2023. The bank expects that the corresponding trend will continue in the current year. This vision of the future is based on the confidence that government measures to support the real estate sector and municipal debt will be effective.
HSBC is not the only European bank that has faced damage amid problems in China’s property area. In October last year, Standard Chartered announced the recovery of losses of a $186 million credit impairment charge concerning commercial real estate in the Asian country.
As we have reported earlier, HSBC to Improve Ties With Hong Kong Unit.
