HSBC takes US$2.3 billion hit with sale of French retail bank to Cerberus-backed My Money Group

Latest sale follows a similar move last month by the UK-based lender to pull out from the US retail banking business
Cerberus’ My Money unit to acquire HSBC’s business for a token €1, and absorb 244 branches, around 3,900 staff and €24 billion of assets

Mergers & Acquisitions

ReutersandSCMP Reporter

Published: 11:15am, 19 Jun 2021

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HSBC has agreed to sell its French retail banking business to Cerberus-backed My Money Group, taking a loss of about US$2.3 billion to exit from the market and focus on Asia.

The deal announced on late Friday sees HSBC take another significant step in a wider retreat from slow-growing European and North American markets where it has struggled against larger domestic players.

The deal will see My Money acquire HSBC’s 244 branches, around 3,900 staff and €24 billion (US$28.5 billion) in assets, creating at a stroke what My Money described as a new challenger bank in France’s crowded retail banking landscape.

“Our aim would be for the bank to return to profitability, three years after we have taken control of it,” My Money Chief Executive Eric Shehadeh said in a statement. Any job cuts would not happen until 2024 or 2025, he added.

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The deal marks HSBC’s second exit from a major Western market this year following the sale of its US retail banking businesses to Citizens Bank and Cathay Bank as chief executive Noel Quinn cuts his losses in markets where the banking group has long struggled to make money.

Low central bank interest rates and competition from domestic players have combined to make traditional deposit-taking retail businesses unattractive in many developed markets in recent years, especially where banks are subscale.

HSBC lost its crown as Europe’s biggest lender by assets at the end of 2020 in a year marked by turbulence caused by the Covid-19 pandemic. BNP Paribas SA’s total assets of €2.52 trillion exceeded HSBC’s €2.44 trillion, according to S&P Global Market Intelligence.

The sale of its French business would be at a nominal €1, HSBC said, adding that the business would have a net asset value of US$2 billion, with the British bank agreeing to make up any shortfall in that valuation. HSBC will retain other parts of its French business including its investment and business banking units.

CEO Noel Quinn is remaking HSBC by trimming unprofitable units to channel its resources in Asia. Photo: Handout

My Money, formerly known as GE Money Bank, is owned by funds under the management of Cerberus Capital Management. It intends to resurrect the Credit Commercial de France (CCF) brand, which HSBC bought for some €11 billion 21 years ago. The firm also plans to invest €200 million in the HSBC unit’s technology infrastructure.

Under French law, the two parties have to consult employees on the deal, and if HSBC and My Money decide to proceed, it could be signed in the third or fourth quarter of this year, with completion due in 2023.

HSBC put its French retail business under “strategic review” in September 2019, with a sale launched in December the same year. The business made a loss before tax of €288 million in calendar 2020, HSBC said.

French banks, which initially studied the dossier, all walked away. The acquisition, though, will add to Cerberus’s purchases of banking assets in Europe, where the US private equity group already owns stakes in German lenders Deutsche Bank and Commerzbank.