Wednesday, 17 July 2024
HSBC announces completion of sale of its Brazil business
On 8 June 2016, HSBC Holdings plc (‘HSBC’) announced that it had received all necessary regulatory approvals for the sale of its entire business in Brazil, comprising HSBC Bank Brasil S.A – Banco Multiplo and HSBC Servicios e Participacoes Ltda (collectively ‘HSBC Brazil’), to Banco Bradesco S.A (‘the Transaction’) and that completion of the Transaction was planned for early July.
The Transaction successfully completed on 1 July 2016.
Progress in executing HSBC’s strategy
The sale of HSBC Brazil represents a significant step in HSBC’s stated goal to optimise its global network and reduce complexity. Based at 31 March 2016, the Transaction was expected to decrease Group risk-weighted assets by around US$37bn and increase the Group’s common equity tier 1 ratio by c.65bps.
As previously announced, HSBC has maintained a presence in Brazil to serve large corporate clients with respect to their international needs.
Accounting treatment
Based on the net assets of HSBC Brazil including allocated goodwill at 31 March 2016 of US$4.3bn, the Transaction would have generated a gain on sale (net of tax and transaction costs) of c.US$0.6bn before the recycling of foreign exchange losses previously recognised in other comprehensive income. After the recycling of foreign exchange losses, there would have been an accounting loss on sale of c.US$1.7bn. Neither the allocated goodwill nor the recycling of foreign exchange losses impact the regulatory capital that will be generated from the disposal at Group level.
The purchase price and impact of sale will be further adjusted for the change in net asset value for the period up until the completion date of 1 July 2016.
Re-disseminated by The Asian Banker
