HSBC Holdings Plc said it sold its Brazilian unit to Banco Bradesco SA for USD 5.2 billion, retreating from the second-largest emerging market economy after years of feeble performance.
In a statement released on Monday, HSBC said that the agreement includes the disposal of the HSBC Bank Brasil SA Banco Múltiplo and the HSBC Serviços e Participações Ltda units to Bradesco.
The sale, which is subject to regulatory approval and was sealed on July 31, should be completed by June next year.
The purchase price, which could undergo adjustments to reflect the net asset value of both businesses, is way above what investors and analysts had expected.
Reuters reported on July 20, citing a source with direct knowledge of the matter, that Bradesco had entered exclusive talks with HSBC for the unit and was willing to pay around 12 billion reais, or 1.2 times book value, for HSBC Brasil.
According to the statement, Bradesco paid about 1.8 times book value for the business. Bradesco, Brazil's second-largest private-sector bank, is currently trading at about 1.5 times book value. Bradesco confirmed the purchase in a statement.
The acquisition allows Osasco, Brazil-based Bradesco to close the asset gap with state-controlled Caixa Econômica Federal and, especially, larger private-sector rival Itaú Unibanco Holding SA.
HSBC Brasil's focus on high-income customers fits well into Bradesco's plan to ramp up sales of specialized financial services for the wealthy and larger corporations.
Strategy missteps coupled with rising competition turned the unit into a problem for HSBC Chief Executive Officer Stuart Gulliver, who in June laid out plans to slash nearly one in five jobs worldwide and fix operations which, like in Brazil, were grappling with operational underperformance, high compliance costs and fierce competition.
HSBC, which arrived in Brazil late in the 1990s, never gained enough size to pose a real threat to Itaú, Bradesco or Banco do Brasil SA, the nation's top lender by assets.
HSBC Brasil has 854 branches, 21,000 employees and about 170 billion reais in assets, or the equivalent of 2.3 percent of the outstanding assets of Brazil's banking system.