HSBC moved to conclude another South American misadventure today when it sold its troubled Argentinian arm for $550 million, leaving a loss of $1 billion.
The sale to Grupo Financiero Galicia will also lead to nearly $5 billion of currency losses due to the weakness of the Argentine peso.
This sale follows a far greater disaster in Mexico more than ten years ago when HSBC was found guilty of money-laundering for Mexican cocaine gangs, moving $7 billion out of Mexico and into the US.
The bank paid a fine of $1.9 billion for what has been dubbed the greatest bank scandal of all time, amid tough competition for that title.
Gary Greenwood at Shore Capital said: “Argentina has been a problematic market for HSBC in recent years given hyperinflation in the region and a sharp currency devaluation, which has resulted in significant earnings volatility for the business. Exiting Argentina also represents a further step in management’s strategy to simplify the Group.”
A long-standing criticism of HSBC is that it is simply too big to manage. It has periodically expanded as part of plans to be “the World’s local bank” before retreating.
Lately it has preferred a “Together We Thrive” brand campaign. Chris Clark, a former marketing chief, has said the “World’s local bank” positioning had been powerful to begin with, but was ultimately “no longer truthful”.
CEO Noel Quinn said: “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.”
HSBC remains committed to its business in Mexico and the US, it insists.
Last December, Argentina’s new government led by Javier Milei devalued the peso by about half against the dollar as part of what the president called “economic shock therapy”. Argentina is fighting inflation that had hit 150%.
Investors took some relief today that HSBC has sold to Argentina’s fifth biggest lender.
The shares moved up 2p to 647p. Shore Capital says the shares are a buy and have a “fair value” of 860p.
