HSBC Looks to Unload French Retail Bank
September 11 2019 - 12:40PM
Dow Jones News
By Margot Patrick
HSBC Holdings PLC is preparing to put its French retail bank on
the sales block in one of its first strategic actions under new
interim Chief Executive Noel Quinn, people familiar with the matter
said.
The potential disposal of the money-losing French unit is part
of a longer-term effort to shed businesses where the bank lacks
scale or strategic need, the people said. HSBC, one of the world's
largest banks by assets with a sprawling global footprint, since
2011 has exited more than 100 businesses and reduced the countries
in which it operates from 87 to 65.
A person familiar with the planned disposal said the likeliest
buyer would be a French bank looking to add market share. HSBC
France has around 300 branches and 800,000 customers, and 2% market
share in retail deposits and lending. It isn't clear what price it
might fetch. European bank valuations have been depressed under the
weight of slow growth and negative interest rates.
HSBC will continue to offer wholesale banking in France, and
Paris will remain its hub for investment banking and corporate
banking business in the European Union if, as expected, Britain
leaves the trading bloc. A formal sales process could start as soon
as this fall.
A spokeswoman said the bank doesn't comment on speculation.
Mr. Quinn was appointed to the interim role in August after the
ouster of former CEO John Flint, with a mandate to move swiftly to
reallocate capital focusing the bank on its strengths.
The move comes as HSBC faces deterioration in its earnings from
slowing growth in China and Hong Kong, its main source of profits.
In Au gust, executives warned that the continuing U.S.-China trade
dispute and antigovernment protests in Hong Kong could hit revenue.
In Europe, the bank is under pressure from negative interest rates
and from the possible exit of the U.K. from the European Union.
HSBC entered the French retail-banking market in 2000 while on a
broader spending spree across the globe. It paid around EUR12
billion, worth about $13 billion at the time, to buy Credit
Commercial de France, calling it a unique opportunity to build a
platform in the eurozone.
It later sold off chunks of the bank and pivoted away from
Europe to focus on Asian growth. More recently, the French unit has
served as a ready-made base for staff and business that would serve
EU customers should Brexit come to pass.
HSBC France SA in its annual report said a EUR55 million ($60.7
million) pretax loss in the retail arm last year was the "result of
adverse financial market variations and low-rate environment."
Retail banking accounted for around 40% of revenue at HSBC France.
France in total contributed around 3.5% to HSBC's total $54 billion
revenue last year.
For more than a year, HSBC executives have flagged the French
retail bank to investors as an underperformer -- alongside its
small U.S. retail business. But efforts to turn it around have been
thwarted by low interest rates. Finance chief Ewen Stevenson told
analysts in August the bank was continuing to invest in multiyear
improvement plans for French and U.S. retail.
A decision to exit French retail was reached before Mr. Flint
was dismissed in August but any action on it was delayed because of
a technology upgrade across HSBC's retail bank, one of the people
said.
HSBC is sticking with its U.S. retail bank for now and has
announced plans to open more branches. In July, it hired Citigroup
Inc. veteran Michael Roberts to step up a turnaround.
Mr. Quinn, formerly global commercial-banking head at HSBC, was
elevated after Chairman Mark Tucker and the HSBC board decided new
leadership was needed, ending Mr. Flint's three-decade career at
the bank with limited public explanation. Mr. Flint said he agreed
with the board that it was the right time for a change.
Mr. Quinn is a candidate to take the CEO job permanently after a
six-to-12-month search.
(END) Dow Jones Newswires
September 11, 2019 12:25 ET (16:25 GMT)
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