HSBC offloads Argentine operations, taking a US$1bn hit, as it sharpens focus on more lucrative Asian markets
HSBC announced on Tuesday that it is selling its business operations in Argentina to Grupo Financiero Galicia, Argentina's fifth-largest bank, for US$550m, resulting in a US$1bn loss for HSBC, as reported by Reuters.
This move is part of HSBC's ongoing efforts, under CEO Noel Quinn, to streamline the bank by withdrawing from underperforming markets, including France and Canada, and to refocus its operations towards Asia, specifically India and China.
Despite the sale, HSBC shares remained stable in London, while its Hong Kong-listed shares saw a 1.1 percent increase.
Analysts, including Gary Greenwood from Shore Capital, highlight that HSBC's exit from Argentina comes after years of significant earnings volatility driven by hyperinflation and sharp currency devaluation in the country.
This sale is seen as a strategic step in simplifying HSBC's operations and reallocating resources towards more profitable areas within its global network.
Furthermore, HSBC anticipates recognizing US$4.9bn in historical currency translation reserve losses upon the deal's completion, attributed in part to a US$1.8bn increase last year due to the Argentinian peso's devaluation.
These losses, the bank assures, have already been accounted for in its capital levels and will not affect its core capital or asset value levels.
CEO Noel Quinn emphasized that this transaction marks a significant move in executing HSBC's strategic goals, allowing the bank to focus on more valuable opportunities within its international network.
He noted that HSBC Argentina's largely domestic focus offered limited integration with the bank's broader international operations and contributed to considerable earnings volatility when translating its results into US dollars.
HSBC's decision to sell its Argentine business also reflects its response to shareholder concerns over the bank's global footprint and strategic direction.
Despite challenges, including a rejected proposal by Hong Kong shareholders to spin off its Asian operations, HSBC remains committed to key markets such as the US, where it exited retail banking in 2021, and Mexico, despite historical regulatory challenges.
