New | HSBC starts talks on Brazilian unit sell-off amid redeployment of assets in Asia
HSBC Holdings was moving quickly on efforts to cut down risk-weighted assets, starting with the possible sell-off of its troubled Brazil unit for US$3.75 billion.
HSBC Holdings was moving quickly on efforts to cut down risk-weighted assets, starting with the possible sell-off of its troubled Brazil unit for US$3.75 billion.
The UK-based bank started talks on Monday with Banco Bradesco, Reuters reported, citing unnamed sources. A deal could be announced before the end of July if HSBC accepts the Brazilian bank’s bid, which valued HSBC’s unit at 1.2 times book value, according to the report.
The intention to sell-off of operations in Brazil and Turkey were formally announced at a meeting with investors on June 9, where the bank’s chief executive Stuart Gulliver outlined a plan to reduce risk-weighted assets by US$290 billion while also redeploying assets in Asia.
“The goal is still reallocation of risk-weighted assets to Asia … [Disposals] in Brazil and Turkey would be part of that,” said BNP Paribas analyst Dominic Chan.
HSBC’s share price was largely unchanged on Tuesday at 11am in Hong Kong. HSBC in Hong Kong declined to comment.
Of the US$290 billion HSBC plans to cut out of its global balance sheet, about US$110 billion were related to Brazil, Turkey and other smaller planned disposals.
HSBC’s business in South America’s biggest economy notched pre-tax losses of 247 million pounds in 2014.
The Reuters report did not say whether Bradesco would pay in cash for the unit, which had assets of about 170 billion reais (HK$412 billion) at the end of March.
The transformation of HSBC’s global banking and markets division was a major highlight of the bank’s meeting with investors. The division, which is often called HSBC’s investment bank, will lose more than US$130 billion in risk-weighted assets, downsizing it to about a third of the group total.
The Asia Pacific region, in particular the Pearl River Delta and Southeast Asia, will soak up as much as US$230 billion in assets, much of which will be shifted from the investment banking division.
Analysts connected the strategy as part of a potential return to Hong Kong for the bank after it said earlier this year that it was reviewing its domicile in Britain.
Investors will now wait for word on the sell-off of HSBC’s Turkish unit, which, combined with operations in Brazil, employs about 25,000 people. Not including those staff cuts, the bank plans to lay off 25,000 more workers.
In Turkey, where it reported a pre-tax loss of 152 million pounds last year, media have said HSBC was in talks with Industrial and Commercial Bank of China on the sales of its retail business. Dutch bank ING was another contender, according to media reports, but for the whole operation in Turkey.
