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HSBC Looks to Unload French Retail Bank

By Margot Patrick 

HSBC Holdings PLC is preparing to put its French retail bank on the sales block in one of its first strategic actions under new interim Chief Executive Noel Quinn, people familiar with the matter said.

The potential disposal of the money-losing French unit is part of a longer-term effort to shed businesses where the bank lacks scale or strategic need, the people said. HSBC, one of the world's largest banks by assets with a sprawling global footprint, since 2011 has exited more than 100 businesses and reduced the countries in which it operates from 87 to 65.

A person familiar with the planned disposal said the likeliest buyer would be a French bank looking to add market share. HSBC France has around 300 branches and 800,000 customers, and 2% market share in retail deposits and lending. It isn't clear what price it might fetch. European bank valuations have been depressed under the weight of slow growth and negative interest rates.

HSBC will continue to offer wholesale banking in France, and Paris will remain its hub for investment banking and corporate banking business in the European Union if, as expected, Britain leaves the trading bloc. A formal sales process could start as soon as this fall.

A spokeswoman said the bank doesn't comment on speculation.

Mr. Quinn was appointed to the interim role in August after the ouster of former CEO John Flint, with a mandate to move swiftly to reallocate capital focusing the bank on its strengths.

The move comes as HSBC faces deterioration in its earnings from slowing growth in China and Hong Kong, its main source of profits. In Au gust, executives warned that the continuing U.S.-China trade dispute and antigovernment protests in Hong Kong could hit revenue. In Europe, the bank is under pressure from negative interest rates and from the possible exit of the U.K. from the European Union.

HSBC entered the French retail-banking market in 2000 while on a broader spending spree across the globe. It paid around EUR12 billion, worth about $13 billion at the time, to buy Credit Commercial de France, calling it a unique opportunity to build a platform in the eurozone.

It later sold off chunks of the bank and pivoted away from Europe to focus on Asian growth. More recently, the French unit has served as a ready-made base for staff and business that would serve EU customers should Brexit come to pass.

HSBC France SA in its annual report said a EUR55 million ($60.7 million) pretax loss in the retail arm last year was the "result of adverse financial market variations and low-rate environment." Retail banking accounted for around 40% of revenue at HSBC France. France in total contributed around 3.5% to HSBC's total $54 billion revenue last year.

For more than a year, HSBC executives have flagged the French retail bank to investors as an underperformer -- alongside its small U.S. retail business. But efforts to turn it around have been thwarted by low interest rates. Finance chief Ewen Stevenson told analysts in August the bank was continuing to invest in multiyear improvement plans for French and U.S. retail.

A decision to exit French retail was reached before Mr. Flint was dismissed in August but any action on it was delayed because of a technology upgrade across HSBC's retail bank, one of the people said.

HSBC is sticking with its U.S. retail bank for now and has announced plans to open more branches. In July, it hired Citigroup Inc. veteran Michael Roberts to step up a turnaround.

Mr. Quinn, formerly global commercial-banking head at HSBC, was elevated after Chairman Mark Tucker and the HSBC board decided new leadership was needed, ending Mr. Flint's three-decade career at the bank with limited public explanation. Mr. Flint said he agreed with the board that it was the right time for a change.

Mr. Quinn is a candidate to take the CEO job permanently after a six-to-12-month search.

 

(END) Dow Jones Newswires

September 11, 2019 12:25 ET (16:25 GMT)

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