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HSBC to sell Brazil business for $5.2 billion

September 1 2015

The Hong Kong International bank – HSBC Holdings PLC said it will sell its Brazil business to Banco Bradesco SA in an all-cash deal valued at $5.2 billion, as it continues to reshape its operations to improve profits.

The bank, which is also close to selling its business in Turkey, announced the deal as it said second-quarter net profit fell nearly 4% to $4.36 billion from $4.54 billion a year earlier. Bad loans fell and the bank booked a $1 billion gain in the second quarter on the sale of part of its stake in China’s Industrial Bank Co.

Four years ago, Chief Executive Stuart Gulliver started to pull HSBC out of countries where it lacked scale or didn’t make enough money. He stepped up the program in June with a plan to cut 50,000 jobs and shave up to $5 billion from its annual costs by 2017. The bank on Monday said it would incur one-time costs associated with the plan in the second half of this year, with the bulk to register in 2016.

The bank’s regulatory woes have often overshadowed its strategy, though, as a host of regulators and authorities globally have found weaknesses in HSBC’s anti-money-laundering controls and the governance at some of its units. Fines, settlements and systems cleanups have cost the bank billions of dollars in the past few years and have weighed on returns.

HSBC said that selling the Brazil business will account for $37 billion of its planned $290 billion reduction in risk-weighted assets it had announced in June. The bank intends to keep a presence in Brazil to cater to large corporate clients.

The bank said it would continue reviewing the possibility of moving its headquarters out of London. HSBC has been considering a move to Asia, in part, executives have said, to reduce the impact of a U.K. tax on bank balance sheets and avoid a European clampdown on bonuses. That review is expected to be concluded by the end of the year.

HSBC’s bank in Brazil is the seventh-largest in the country, with a 2.7% market share of banking assets. It made a $191 million pretax profit in the first half, after a $247 million full-year pretax loss last year. The unit employs around 21,000 people.

Source Wall Street Journal

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