HSBC reaches revised terms for sale of its French retail banking business
- HSBC to retain US$7.6 billion in loans as part of revised transaction; expects to take pre-tax loss of up to US$2.7 billion on sale
- Lender warned in April that completion of transaction was ‘less certain’ following interest rate increases
The revised terms will see HSBC’s European business, in part, retain a portfolio of €7 billion (US$7.6 billion) in home and other loans originally expected to be transferred as part of the transaction. Those loans will be serviced by My Money Group post-closing and HSBC can pursue sale opportunities at an appropriate time.
HSBC is expected take an estimated pre-tax loss of as much as US$2.7 billion on the transaction, with a pre-tax loss of US$2.2 billion expected to be recognised in the second half of this year when the business is reclassified as held for sale. The final loss will be determined by prevailing interest rates.
HSBC first announced the sale of its French retail banking business in June 2021 as part of CEO Noel Quinn’s plans to streamline the bank’s operations and shift capital from underperforming businesses in the West to faster-growing markets in Asia.
Following the revised agreement, HSBC said the net asset value of the business will be set by reference to the prevailing mortgage interest rate and the 10-year mid-swap rate at closing, capped at €1.72 billion.
Depending on the prevailing rates, HSBC’s European arm would receive a profit participation interest of up to €509 million in exchange for investing capital in the holding company of My Money Group.
The revised memorandum of understanding includes a long-term agreement for HSBC’s European arm to license the Crédit Commercial de France brand to the purchaser.
As part of the revised deal, funds managed by Cerberus will also inject €225 million of additional capital into My Money Group ahead of closing.
The revised deal is expected to be completed by January 2024 and is subject to regulatory approval.
The sale of the French business is one of several moves by Quinn to reshape HSBC and double down on future growth in Asia in recent years.
The bank generates the bulk of its pre-tax profit in Asia, but its management has argued its international network of connecting businesses between East and West is core to its strategy.