HSBC’s French retail unit sale ‘less certain’ on interest rate rises

BLOOMBERG 

HSBC Holdings Plc said rising interest rates have put a deal to sell its French retail banking business into question, a potential blow to its plans to streamline its global operations.
The UK lender said in a statement that “significant, unexpected interest rate rises in France” since it signed a memorandum of understanding with Cerberus’s My Money Bank in 2021 have increased the capital requirements on the buyers, potentially putting the transaction in doubt.
“The Purchaser Group advised us that they consider they will be unable to obtain regulatory approval without amending the previously agreed transaction terms,” HSBC said. “The parties are continuing discussions. If the transaction does proceed, it is expected that
closing will be delayed.”
As a result, HSBC said it would no longer classify the unit as held for sale and reverse a previously recognised $2 billion impairment. The change will also boost its CET1 ratio, a key measure of its financial strength, by about 25 basis points.
The lender said if the sale doesn’t proceed, there would be “no material impact on guidance or performance of HSBC.”
Private equity firms have seen their buying power impacted by higher financing costs and banks’ reluctance to lend on larger transactions.
The sale was part of HSBC’s worldwide overhaul that aims to reduce gross risk-weighted assets, cut thousands of jobs and shift its investment focus towards Asia.
HSBC’s French retail business stems from the bank’s acquisition of Credit Commercial de France in 2000 for €11 billion. The bank said at the time the MoU with Cerberus was signed that it expected a $2.3 billion pretax loss on the long-awaited disposal as well as a $700 million goodwill impairment if it completes.
HSBC said in the statement that if the transaction isn’t completed by May 31, 2024, the agreement with Cerberus will terminate automatically.