Also Monday, HSBC announced it is selling its business in Brazil to Banco Bradesco SA for $5.2 billion amid a sweeping effort to streamline global operations.
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We at Bidness Etc believe that with the cost cutting measures and ongoing consolidation of its operations, HSBC is on the right track to achieve its target of reduction in costs by 2017. It was reported earlier last month that Bradesco had entered into exclusive talks with HSBC after offering to pay about 12 billion reais or 1.2 times book value for the assets of HSBC Brasil.
HSBC has become increasingly reliant on Hong Kong for profits as its businesses in Europe, the United States and other emerging markets slow.
The future of HSBC as a UK-based bank will come into renewed focus when the lender reports half-year results this week while Standard Life and More Than owner RSA are among a clutch of major insurers publishing latest figures.
The world’s second-largest bank in terms of assets said it wanted to shed billions of dollars of those assets, and it’s started by inking a $5.2bn deal in Brazil.
With the exception of several Chinese banks and Grupo Financiero Inbursa SAB, the Mexican bank controlled by billionaire Carlos Slim, foreign banks have remained wary of entering Brazil, where the top-six players control nearly 90 percent of banking assets.
The lender’s shares were unchanged in Hong Kong on Monday early afternoon, against a 1 percent drop in the city’s benchmark Hang Seng index.
HSBC had had a presence in the country since 1997 and expanded further in the country in 2003 with the acquisition of Lloyds’ Brazil unit.
One of the reasons the bank is thinking of relocating is because of UK bank levy, which cost HSBC more than £750 million last year and an expected £950 million this year.
Gargiulo also said that scale was crucial in Brazil’s retail banking sector, where HSBC had been trying to compete.
The news comes despite a reputational hiccough in February, when its Swiss private bank was accused of helping wealthy clients dodge tax.
The bank is also considering a sale of its Turkish unit in view of sliding second-quarter net profit that fell by around 4% to $4.36bn from $4.54bn in the previous year.
At the bank’s June update HSBC confirmed plans to axe up to 25,000 jobs worldwide, including as many as 8,000 in the UK.
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“The acquisition will provide diverse benefits to customers of both institutions, such as an increase in coverage and in the service network across all of the national territory”, Bradesco said in a statement.
