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HSBC sells Central American operations

by Laura Board in London  |  Published January 24, 2012 at 3:23 PM ET
HSBC-sells-Central-American-operations227.jpgHSBC Holdings plc agreed Tuesday, Jan. 24, to sell businesses in three Central American countries in the latest chapter of its worldwide retrenchment.

Colombia's Banco Davivienda SA will pay HSBC $801 million in cash for its entire banking operations in Costa Rica, El Salvador and Honduras.

The sale is part of a restructuring initiated by HSBC chief executive Stuart Gulliver in May 2011. Gulliver wants to cut up to $3.5 billion of costs by the end of next year and focus on HSBC's largest businesses and on operations that complement each other.

Highlights of HSBC's global retrenchment so far include the pending sale of its U.S. credit cards business to Capital One Financial Corp. for $2.6 billion and its divestment of 195 branches mainly in upstate New York to First Niagara Financial Group Inc. for $1 billion. In December HSBC agreed to sell Japanese wealth management operations to Credit Suisse Group for an undisclosed sum.

Antonio Losada, HSBC CEO-designate for Latin America, said in a statement that the disposal "demonstrates our commitment to driving growth and improving returns in Latin America by divesting of businesses that do not meet our investment criteria."

As of Sept. 30, the businesses being sold consisted of 136 branches across the three countries, holding about $4.3 billion of assets and $2.5 billion in loans.

Davivienda is Colombia's third-largest bank, with 32.8 trillion pesos ($18.04 billion) of assets as of June. It had a market value of Col$9.06 trillion after its stock declined 1.3% in early trading Tuesday in Bogota.

HSBC is Europe's largest bank by market value, and was worth £96.7 billion ($150.7 billion) as of midafternoon in London.

On Nov, 21, the U.S. Office of the Comptroller of the Currency agreed to reopen the comment period until Dec. 19 on HSBC's largest disposal to date -- the $2.6 billion credit cards deal with Capital One. The decision followed a request from The National Consumer Reinvestment Coalition, a group of consumer, civil rights and labor groups, which cited some of the same concerns it raised with the Federal Reserve about Capital One's $9 billion deal in June to buy ING Groep NV's ING Direct USA.

The sale of the Central American businesses to Davivienda is expected to close in the fourth quarter.

A Hughes Hubbard & Reed LLP team led by partners Amy G. Dulin and Michael Weinsier advised Banco Davivienda.