HSBC to book $1bn earnings hit from sale of business in Argentina

HSBC has agreed to sell its Argentina business in a move that will see the bank book a $1bn (£800m) pretax loss in its first-quarter earnings.

The bank announced on Tuesday that it had struck a deal to offload the unit to domestic financial services firm Grupo Financiero Galicia for $550m (£434m), subject to certain price adjustments.

Under the agreement, Galicia will acquire all of HSBC Argentina’s business, including banking, asset management and insurance, as well as $100m (£79m) of subordinated debt.

HSBC said the sale would force it to recognise $4.9bn (£3.9bn) in historical currency translation reserve losses at the close of the deal, which is expected in the next 12 months. Its foreign currency translation losses grew by $1.8bn (£1.4bn) last year due to the devaluation of Argentina’s peso.

The news comes as HSBC, the UK’s largest bank by market capitalisation, has been gradually reducing its global footprint in a pivot to focus on India, Singapore and China.

It has exited retail markets in the US and France, and late last month, completed the sale of its Canadian unit to RBC – for which it expects to book an estimated $4.9bn (£3.9bn) in the first quarter.

Noel Quinn, chief executive of HSBC, said on Tuesday: “We are pleased to agree the sale of HSBC Argentina. This transaction is another important step in the execution of our strategy and enables us to focus our resources on higher value opportunities across our international network.

“HSBC Argentina is largely a domestically focused business, with limited connectivity to the rest of our international network. Furthermore, given its size, it also generates substantial earnings volatility for the group when its results are translated into US dollars. Galicia is better placed to invest in and grow the business.

“We remain committed to Mexico and the US, and to serving our international clients throughout our global network with our leading transaction banking capabilities.”