HSBC Signs Agreement to Alter Sale Terms of French-Unit; Sees Loss of Up to $2.7 Billion
June 14 2023 - 11:32AM
Dow Jones News
By Joe Hoppe
HSBC Holdings said Wednesday that it has signed a memorandum of
understanding to alter the terms of the sale of its French retail
banking business, and it now sees a total pretax loss on the sale
of up to $2.7 billion.
HSBC said the potential changes are designed to allow the
buyer--a company owned by the private-equity firm Cerberus Capital
Management--to satisfy its future capital requirements, following
significant interest-rate rises since the sales was first agreed in
2021, and obtain regulatory approval.
The financial hit from the deal is now expected to be a
cumulative pretax loss of up to $2.7 billion. The final loss will
be determined when the deal closes, referencing the prevailing
rates at the time.
The changes include HSBC Continental Europe, or HBCE, retaining
a portfolio of 7.0 billion euros ($7.56 billion) of home loans
which were originally part of the sale, the net asset value of the
business transferred upon closing being set according to the
prevailing interest and mid swap rates, and a long-term agreement
for HBCE to license the Credit Commercial de France brand to the
buyer, among others.
HSBC said the changes don't alter the underlying rationale for
the sale, which will allow HBCE to focus on its international
wholesale business model. The transaction is expected to complete
on the first day of 2024.
HSBC took an accounting hit last year after it announced the
planned sale of the French retail bank. But it said in April it had
to renegotiate the deal because rising interest rates had increased
capital requirements for the buyer, affecting its ability to get
regulatory approval for the deal unless those are addressed.
Write to Joe Hoppe at joseph.hoppe@wsj.com
(END) Dow Jones Newswires
June 14, 2023 11:17 ET (15:17 GMT)
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