HSBC agrees to sell off its Argentina business – Life Changer

HSBC agrees to sell off its Argentina business

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  • By Ione Wells & Robert Plummer
  • BBC News, São Paulo and London

Banking giant HSBC is selling off its business in Argentina at a $1bn (£790m) loss after years of battling with the country’s unstable exchange rate.

HSBC Argentina, which has more than 100 branches and 3,100 employees, will be bought by Grupo Financiero Galicia, a major private financial group.

Annual inflation in Argentina hit 276.2% last month, the highest in the world.

Five years ago, $1 would buy 43 pesos. It is now worth more than 860 pesos.

HSBC has been in Argentina since 1997, when it took full control of the local Banco Roberts and renamed it. That same year, it established itself in neighbouring Brazil by taking over the ailing Bamerindus bank, leading some observers to speak of its “relentless march into Latin America”.

HSBC still holds on in Brazil, but purely as an investment bank: it sold its retail banking operation there in 2015.

Other operations elsewhere in the world have been sold off in recent years as the London-based bank has pivoted to focus more on faster-growing markets in Asia.

HSBC said the sale of its Argentine business, for $550m, will see it book a $1bn loss in its first-quarter results this year.

The size of the loss could vary for several reasons, including “associated hyperinflation and foreign currency translation”, HSBC said on Tuesday.

Over the next 12 months, the business will also recognise $4.9bn in losses from historical currency translation reserves.

This refers to the loss that is racked up by translating the financial performance of the Argentine business, which is counted in pesos, on to HSBC’s overall balance sheet, which is counted in US dollars.

“These reserve losses have accumulated over many years and arise from the cumulative translation of the Argentinian peso-denominated book value of HSBC Argentina into US dollars,” HSBC said.

In 2023 alone, these losses grew by $1.8bn, the bank added.

The exact losses may well change between now and when the sale goes through, because the exchange rate is constantly changing.

HSBC chief executive Noel Quinn said: “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.”

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