HSBC takes $1b hit from Argentina sale

HSBC is selling its business in Argentina and booking a $1 billion loss on the deal, the bank said on Tuesday, as it continues to shrink its once globe-spanning empire to focus on Asia.

HSBC is selling the business, which covers banking, asset management and insurance, to Argentina’s fifth largest bank Grupo Financiero Galicia for $550 million, the British bank said.

HSBC CEO Noel Quinn has sought to simplify the sprawling lender to improve performance by exiting several markets in which it has under-performed, including France and Canada.

The sale also fits with the bank’s Asia pivot strategy as it shifts capital, especially to India and China.

HSBC’s shares were flat in early trading in London, while its Hong Kong-listed shares gained 1.1 per cent.

“Argentina has been a problematic market for HSBC in recent years given hyperinflation in the region and a sharp currency devaluation, which has resulted in significant earnings volatility for the business,” said Gary Greenwood, analyst at Shore Capital.

“Exiting Argentina also represents a further step in management’s strategy to simplify the Group and concentrate resources on areas of the business where greater shareholder value can be created,” he said. As well as booking a loss in the first quarter, HSBC said the deal would lead it to recognise $4.9 billion in historical currency translation reserve losses when the sale closes.

The losses grew by $1.8 billion last year as a result of the devaluation of the Argentinian peso, the bank said.

HSBC said those losses had already been recognised in its capital levels and would have no impact on its core capital or asset value levels.

“This transaction is another important step in the execution of our strategy and enables us to focus our resources on higher value opportunities across our international network,” Quinn said in a statement.