HSBC selling unprofitable Brazil unit to Bradesco for $5.2 bln

SAO PAULO - Reuters

View of the facade of a HSBC bank cash dispenser, following the announcement of the bank to close HSBC Brazil, at Cinelendia square, downtown Rio de Janeiro on June 9, 2015. AFP Photo

HSBC Holdings Plc agreed to sell its Brazilian unit to Banco Bradesco SA for $5.2 billion, retreating from the second-largest emerging market economy after years of disappointing performance.

Europe’s No. 1 bank said in a statement on Aug. 3 that the accord with Bradesco includes the disposal of the HSBC Bank Brasil SA Banco Múltiplo and the HSBC Serviços e Participações Ltda units. The sale, which still requires regulatory approval and was sealed on July 31, could be completed by June next year.

The purchase price, which could undergo adjustments to reflect the net asset value of both businesses and is equivalent to 1.8 times book value, was way above what analysts expected. Reuters reported on July 20 that Bradesco had entered exclusive talks with HSBC after offering to pay about 12 billion reais, or 1.2 times book value, for HSBC Brasil.

Other sources had told Reuters in June that fellow suitor Itaú Unibanco Holding SA had placed a bid below book value for HSBC’s Brazilian business. Bradesco, Brazil’s second-largest private-sector bank, is currently trading at about 1.5 times book value.

The acquisition will allow Osasco, Brazil-based Bradesco to close the asset gap with larger rivals Itaú and state-controlled banks Banco do Brasil SA and Caixa Econômica Federal. HSBC Brasil’s focus on high-income customers fits well into Bradesco’s plan to ramp up sales of specialized financial services for the wealthy and larger corporations.

“The acquisition will create scale gains and the optimal use of business platforms, leading to bigger nationwide coverage ... and reinforcing the bank’s presence in the high-end income segment,” Bradesco said in a securities filing.