BRASILIA: HSBC Holdings PLC agreed to sell its Brazilian business for $5.2 billion, the latest retreat from its onetime ambition to be “the world’s local bank.”
HSBC said it entered an all-cash deal to sell the Brazilian unit to Banco Bradesco SA, leaving it with a small Mexican operation that will increasingly be focused on catering to companies conducting trade with the U.S. and Canada.”
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The bank, in a June strategy update, had said it would pivot its business back to Asia, where its Hongkong and Shanghai Bank has been operating for 150 years.
Announcement came as HSBC reported a 4% drop in second-quarter net profit to $4.36 billion from $4.54 billion, reflecting higher operating costs and tax charges in the period. But a rise in revenue and a drop in bad loans pushed pretax profit higher in the three months to June 30, to $6.57 billion from $5.56 billion.
James Chappell, an analyst at Berenberg Bank, said the results were “a reassuring starting point for the revised strategy, with results slightly better than consensus.”
Chief Executive Stuart Gulliver told analysts that tapping fresh growth opportunities in Asia is a priority but wouldn’t be the exclusive focus of where HSBC chooses to reinvest capital being freed up by reducing activities elsewhere in the world. The bank is aiming to reduce risk-weighed assets by $290 billion and Mr. Gulliver said about half of the capital freed up would be channeled to Asia, with the rest dispersed into Europe, the Middle East and North Africa, and North America.
