In an effort to shed its non-core assets and improve
efficiency, HSBC Latin America Holdings Limited - a fully-owned
HSBC Holdings plc
) - has entered into a deal to sell HSBC Bank (Panama) S.A. to
Bancolombia S.A. The deal is anticipated to close by the third
quarter of 2013, subject to regulatory approvals and other
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Bancolombia will pay $2.1 billion in cash, three times the
estimated net asset value of HSBC Panama, on closure. HSBC
acquired the majority of its Panamanian division in 2006 when it
bought Grupo Banistmo SA for $1.77 billion.
The sale of the this unit is part of the banking giant's strategy
to concentrate more on economies where it has a superior market
share, such as Brazil, Mexico and Argentina.
HSBC has resorted to aggressive restructuring since 2011. These
initiatives involve streamlining of its worldwide operations by
shedding non-core assets and trimming workforce. The lender has
sold 46 assets, which include units in Costa Rica, El Salvador
and Honduras. The bank aims to increase return on equity to at
least 12% and reduce expenses by roughly $3.5 billion by the end
Earlier this month, HSBC concluded the sale of its stake in
Chinese insurance giant Ping An Insurance (Group) Company of
China, Ltd to Thailand-based Charoen Pokphand Group. The deal
fetched HSBC a post-tax gain of $2.6 billion, after deducting the
carrying value of an investment in Ping An as well as
reclassification of the connected foreign exchange and other
In May 2012, HSBC sold some of its businesses in Latin America
for about $400 million in cash to Colombia's Banco GNB Sudameris
SA. The deal included units in Colombia, Peru, Uruguay and
Paraguay, having an aggregate asset value of $4.4 billion at the
end of 2011. Earlier in Jan 2012, the bank sold its Honduras unit
to Bogota-based Banco Davivienda SA.
The planned divestiture of the Brazilian consumer finance
business will not only bring long-term benefits for HSBC, but
also help the company concentrate on its emerging market
strategy. Moreover, we expect HSBC to continue with such
strategic sale of business units, thereby enhancing its capital
strength going forward.
Many other European banks have adopted almost similar
cost-cutting measures in the wake of a sluggish economic
environment compounded by the sovereign-debt crisis in the
Deutsche Bank AG
Credit Suisse Group
ING Groep NV
) have also been divesting non-core assets and eliminating jobs
to reinforce profits over the past couple of years.
Currently, HSBC carries a Zacks Rank #3 (Hold).