HSBC to take $1bn hit on sale of Argentina unit

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HSBC has agreed to sell its business in Argentina to domestic lender Grupo Financiero Galicia for $550mn as it exits a market where its business has been affected by hyperinflation and a volatile currency.

The UK-based lender will book a $1bn hit to its pre-tax earnings in the first quarter of 2024 as a result of the sale, the latest in a series of moves to sell off parts of its operations.

HSBC will also have to recognise $4.9bn in historical losses related to the falling value of the peso when the deal closes, which is expected to be within the next 12 months, the bank said on Tuesday. Those losses grew by $1.8bn in 2023.

Noel Quinn, chief executive of HSBC, said in a statement that the sale “enables us to focus our resources on higher value opportunities across our international network”.

This year HSBC has completed the sale of its Canada unit and its French retail banking business. It has previously agreed to sell its operations in Greece and Russia. Chief financial officer Georges Elhedery said last year that the bank was considering selling or scaling back businesses in 12 countries, though he did not say which.

Quinn said on Tuesday that the bank’s business in Argentina was largely focused on the domestic market, with limited ties to its global operations, and generated “substantial earnings volatility” when its results were translated into US dollars.

The historical currency translation losses of $4.9bn have been reported on HSBC’s income statement, meaning their recognition once the deal closes will not affect the bank’s CET1 ratio, the capital buffer that regulators require it to hold in case of a crisis.

Argentina is struggling with sky-high inflation. The IMF forecasts its economy will contract 2.8 per cent this year.

HSBC reported a £500mn charge related to the country’s escalating prices in its fourth-quarter earnings in February.

Galicia will acquire the entire HSBC Argentina business, including banking, asset management and insurance, HSBC said. It will cover about half of the $550mn price tag using American depositary receipts — instruments that represent shares — giving HSBC a stake of less than 10 per cent in Galicia. The remainder will be paid in cash and loan notes, HSBC said.

HSBC has more than 100 branches in Argentina with about 3,100 employees. In 2023 it reported $239mn in pre-tax profit in the country.

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