Michael Bow
9 April 2024
Argentine president Javier Milei is battling to get inflation under control after it rocketed to 140pc last year - Agustin Marcarian
HSBC is offloading its business in Argentina at a $1bn (£790m) loss amid a battle to calm hyperinflation by Javier Milei, the country’s new “anarcho-capitalist” president.
The bank will sell HSBC Argentina to Grupo Financiero Galicia, the largest private lender in the country.
HSBC, which is selling the operation for $550m, will take a $1bn loss on the sale and book about $5bn of historical losses once the deal closes, which is expected within the next 12 months.
HSBC Argentina comprises 100 branches and 3,100 employees.
The bank said that its Argentine arm has started to create volatility in its financial results.
It booked a $500m charge for hyperinflation in Argentina in February after translating HSBC Argentina’s earnings in pesos into US dollars.
Since taking office in December, President Milei has devalued the peso by 54pc amid an economic crisis in the country.
The president has also been battling to get inflation under control after it rocketed to 140pc last year.
Noel Quinn, chief executive of HSBC, said the bank's Argentine arm was generating 'substantial earnings volatility' for the group - Lam Yik
President Milei is a libertarian and self-described anarcho-capitalist who has praised Donald Trump.
During his election campaign, the former TV pundit campaigned wielding a chainsaw above his head as a symbol for his plans to slash state-spending.
Noel Quinn, chief executive of HSBC, said exiting Argentina would allow the bank to focus on better opportunities across its empire.
He said: “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.
“We remain committed to Mexico and the US, and to serving our international clients throughout our global network with our leading transaction banking capabilities.”
Gary Greenwood, an analyst 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.
“While there is significant accounting ‘noise’ associated with this disposal, we do not expect it to have a material impact on the valuation of the stock or the investment case.”
HSBC has cut back in several countries this year, selling both its Canadian business and its French retail business.
No comments:
Post a Comment