HSBC, with the biggest banking operations in Europe, is leaving its Argentine market, which it has been working on for almost 30 years. The bank has concluded a deal with Grupo Financiero Galicia, a leading financial institution in the country, by which it will cede all of its Argentina business, including banking, asset management, and insurance services, at a $550 million acquisition price. This is a quite an expensive plan and it is predicted that in Q1 2024 the bank intends to post an after-tax loss of about $1 billion in its financial statements.
Sale aligns with HSBC’s strategic diversification towards emerging markets, with a special focus on the Asian region. Argentina’s economic climate, plagued with high inflation and a sensitive currency, is not the most friendly environment for HSBC.
“We are indeed delighted with this deal, an integral part of our strategy’s execution, as it provides us an opportunity for diverse refocusing of the resources across the international network,” Noel Quinn, HSBC Group Chief Executive Officer, stated recently [HSBC agrees to sell its business in Argentina].
HSBC Argentina unit, as a business, follows the domestic market. Such a structure harmed its transformation into an international network of the bank. Later, apart from the tag size, changes in the Argentinian peso affected substantially the revenue HSBC got from all over the world once it got to the U.S. dollar.
In contrast, Group Financial Galicia, through its extensive experience in the Argentinian market, will be able to move forward. ; Hence, it will be possible for them to continue functioning normally in the Argentinian market. Being the biggest private financial group, it has the appropriate expertise and the resources to get used to the local weather conditions. This is where they immerse themselves in and grow the newly acquired company by investing in it.
This agreement is contingent upon regulatory authorizations and closure of the transaction is expected to be completed no later than 12 months. HSBC will get a form of cash, loan notes, and American-recommended depositing receipts (ADRs) from Galicia. Galicia will give this as payment.
The withdrawal of HSBC from Argentina also becomes the latest evidence showing that international banks divesting from the markets with unstable economies. The bank has set up a pattern of separation in other crisis markets and liquidating the resources for business regions that perform better and have growth potential.
In addition to this, we will keep an eye on how this acquisition will affect HSBC’s Argentina staff. Grupo Financiero Galicia showed a willingness to keep a significant portion of the workforce employed, but we can expect a reduced number of jobs in the process of integration.
The transaction for HSBC is part of its game plan to reduce the size of the business and concentrate on the markets that are most needed. Nevertheless, this great failure shows that it is difficult to grow the business in an uncertain economic climate. On the other hand, Grupo Financiero Galicia will see a tremendous increase in its market share and will be given a fantastic opportunity to strengthen and extend its range of services. We are likely to see the consequences of this shifting shortly when it will be evident how these two institutions will be affected by the new financial system.
.
