HSBC faces $4.5b hit in French retail sale

Shares of HSBC (0005) revised an earlier gain to end lower yesterday following reports that the bank is in final talks to sell its French segment at a loss of over HK$4.5 billion. US private fund Cerberus and a rival investment firm have told HSBC that they would buy its French retail arm for a...

Reuters and Stella Zhai

Wednesday, September 30, 2020

Shares of HSBC (0005) revised an earlier gain to end lower yesterday following reports that the bank is in final talks to sell its French segment at a loss of over HK$4.5 billion.

US private fund Cerberus and a rival investment firm have told HSBC that they would buy its French retail arm for a symbolic one euro (HK$9.07) provided the British bank ploughs more than 500 million euros into the business, sources told Reuters.

The bank is working with investment bank Lazard to sell its 270 retail branches in the market, as part of chief executive Noel Quinn's strategy to slash costs across the banking group.

The bank has been struggling to attract interest in the unit as bidders fret at the heavy restructuring assumed to be necessary and complex talks with local regulators.

Cerberus and the other investor are the only bidders left in the process while French banks -- which initially studied the dossier -- have all walked away, three sources said.

The stock in Hong Kong rose as much as 2 percent before it turned to see a 2.6 percent loss at HK$30, while shares in London slid 2.7 percent as of 9.40pm yesterday.

The bank just recorded its biggest interday increases since 2009 in both markets on the previous trading day with its biggest shareholder Ping An Insurance (2318) raised its stake, expecting the lender will return to paying dividends.

HSBC has previously said the French business is under a strategic review.

Both bidders want the business to be fully recapitalized with HSBC injecting at least 500 million euros before they can buy it for a symbolic amount of one euro, the sources said.

"The price is going to be disastrous for HSBC," one of the sources said.

While the British lender is still working to reach an agreement by the end of the year, the process could still fall through due to regulatory demands and the prospect of heavy job cuts, another source said.

Failure to complete the sale would be a significant hit to HSBC's restructuring, as the bank attempts to complete the latest of a series of asset disposals in recent years aimed at improving returns for long-suffering shareholders by shedding underperforming businesses.