HSBC Signs Agreement to Alter Sale Terms of French-Unit; Sees Loss of Up to $2.7 Billion

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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