HSBC sold its Argentina bank for $550M and booked a $1B loss

On 9 April 2024 HSBC Holdings said it would sell its entire Argentine business to Grupo Financiero Galicia for $550 million, subject to price adjustments. The deal covered banking, asset management and insurance, plus $100 million of subordinated debt. HSBC Argentina had more than 100 branches, 3,100 employees and about one million customers, and earned a pre-tax profit of $239 million in 2023.

The exit still cost HSBC about $1 billion, which it booked as a charge in the first quarter. When the deal closes it will also recognise about $4.9 billion of historical foreign currency translation losses, the accumulated effect of converting the unit's peso book value into dollars over the years. HSBC said these were already reflected in its CET1 capital ratio and excluded them from its dividend payout calculation, which stayed at 50% for 2024.

CEO Noel Quinn said the unit had 'limited connectivity' to the rest of the group and created 'substantial earnings volatility' when results were translated into US dollars. President Javier Milei's devaluation of the peso by more than 50% had cut the bank's fourth-quarter pre-tax profit by $548 million, and Bloomberg Intelligence noted hyperinflation had been a drag on the operations.

The Argentine business earned in pesos but HSBC reports in dollars, so every devaluation shrank its contribution to group earnings.

Management judged the unit had limited connectivity to the rest of the network, so it gave little strategic benefit to offset the volatility.

HSBC was concentrating on faster-growing Asian markets, and Argentina competed for capital with higher-value opportunities there.

A foreign unit that earns in a collapsing currency can stay profitable locally and still lose money for the group. Exposure you cannot connect to the network ends up sold at the bottom.

The sale was expected to complete within 12 months. Bloomberg Intelligence put the roughly $1B loss at about 3% of 2024 consensus pre-tax profit, with limited impact on CET1, dividend capacity and planned buybacks. Argentina was one of several disposals as HSBC pivoted to Asia: it had already exited parts of its North America and France businesses, completed the sale of its Canadian unit to Royal Bank of Canada in March 2024, and was exploring sales of German wealth, custody and fund administration units.