Dive Brief:
- HSBC agreed Friday to sell its French retail banking operations to U.S. private-equity company Cerberus for €1.
- Europe’s largest lender expects to take a $3 billion hit as part of the deal, which is set to close during the first half of 2023. That breaks down to $2.3 billion in pretax losses and a $700 million goodwill write-down, according to The Wall Street Journal.
- France represents the second major retail market from which HSBC has largely withdrawn in the past month. The bank announced in late May that it was selling 80 of its 148 U.S. branches to Citizens Bank and 10 more to Cathay Bank, while closing another 35 to 40 locations.
Dive Insight:
HSBC kicked off the sale of its French retail operations in January 2020, months after it told Reuters it had no plans to do so. As negotiations dragged on, Cerberus and a rival told the bank they would buy the French retail arm for a symbolic €1 if the bank were to invest €500 million into the business.
It was later agreed instead that HSBC would ensure the business has a net asset value of $2 billion at the time of transfer — which may require the London-based lender to put in more cash. HSBC CFO Ewen Stevenson, however, told the Financial Times that potential payout should be viewed in context: HSBC’s French retail business lost €236 million last year.
Friday’s deal expands Cerberus’s reach into European banking. The company already holds sizable stakes in Germany’s Deutsche Bank and Commerzbank. Cerberus has said it plans to combine HSBC’s French retail operations with My Money Group, a French lender the private-equity firm bought from General Electric in 2017. That move would essentially create a challenger bank in France.
My Money Group would gain control of HSBC’s 244 French branches. It would also inherit 800,000 customers with €21.5 billion in loans and €18.9 billion in deposits.
About 3,900 HSBC employees would migrate to My Money Group in the transaction. That undoubtedly will help HSBC achieve its objective to cut 35,000 jobs and $100 billion in assets by 2023.
The divestiture also would "enable [HSBC] to dramatically simplify our business in Continental Europe and allow us to accelerate the transformation of our European wholesale banking franchise," CEO Noel Quinn said in a statement Friday.
“The business was generating a sizable loss in a country where we are subscale and in a market that is challenged for returns,” Quinn told the Financial Times. “We have better choices available to us. Investing in the U.K. and Asia offers higher returns."
An HSBC executive told Bloomberg on Monday the bank aims to become the top wealth manager on the continent in "roughly five years." The bank in February laid out a plan to spend an additional $6 billion over the next five years to expand in Hong Kong, China and Singapore. The bank is pouring more than half of that into growing its wealth business, which is expected to hire more than 5,000 new advisers.
HSBC broached the French retail market in 2000, when it bought Credit Commercial de France for $10.6 billion. My Money Group said it plans to revive the Credit Commercial de France brand.
“The CCF brand is a game changer," Eric Shehadeh, My Money Group's chief executive, told the Financial Times. "And to rejuvenate the French brand is totally within our strategy."
The strategy is to return what will become CCF to a profit in three years and target a double-digit return on equity, Shehadeh said, adding that there will be no forced redundancies over the next three years.
My Money Group said it plans to offer insurance and asset management products in France, but isn’t acquiring those units from HSBC.
