The sale for a € 1 token follows long negotiations with Cerberus, which buys the 244 branches and 800,000 customers of HSBC in France via its subsidiary MyMoneyGroup, a consumer credit group.
The deal is the latest step in HSBC’s plan to focus more on Asia while cutting costs in the west, including 35,000 jobs in Europe and the United States. The bank sold its US distribution network of 150 branches last month.
The transaction with Cerberus will see HSBC record a pre-tax loss of about $ 2.3 billion as well as a charge of $ 700 million related to goodwill impairment, the bank said in a statement Friday.
“The business was generating a significant loss, in a country where we are undersized and in a market with contested returns,” HSBC chief executive Noel Quinn told the Financial Times. “We have better choices at our disposal. Investing in UK and Asia offers higher returns so why invest money in a market even at the end of [a turnround] you are not getting a high enough return? “
For Cerberus, the deal is its next bet on the European bank. The New York-based buyout company is already a major shareholder of Deutsche Bank and Commerzbank in Germany and has the largest stake in Hamburg Commercial Bank.
Eric Shehadeh, Managing Director of MyMoneyGroup, said the group plans to resurrect the Crédit Commercial de France brand, which HSBC contributed for € 11.1 billion in 2000. “The CCF brand is a game-changer. And rejuvenating the French brand is totally part of our strategy, ”said Shehadeh.
By the time HSBC took control, CCF had a high-end clientele as well as a handful of regional banks. Over the past two decades, HSBC has sold the regional banks of the CCF, for 2.1 billion euros, its headquarters on the Champs-Elysées for 400 million euros and has integrated some of its operations into those of the group within the meaning large.
Critics say HSBC has overlooked the brand and hasn’t invested enough in the company, prompting Cerberus to demand an investment from HSBC in the sale negotiations that have been going on since late last year.
As part of the sale, HSBC has agreed to ensure that the company has a net asset value of $ 2 billion upon divestment – a commitment that may require HSBC to inject more liquidity. An initial HSBC plan to transfer 500 million euros to Cerberus on the basis of a lower net asset value for the company has been scrapped, according to a person familiar with the matter.
HSBC CFO Ewen Stevenson said in an interview that while the overall loss on the sale was significant, it must be seen in the context of the $ 500 million that French retail has lost over the two years and the impact on profits and capital. he would have continued to have.
The new CCF and MyMoneyGroup will have a leading combined core capital ratio – an important measure of balance sheet strength – above 15%.
Cerberus, which created MyMoneyGroup after having bought the French consumer credit business of General Electric in 2016, will also devote 200 million euros to the “overhaul of the digital architecture” of the CCF.
The plan is to return the company it is buying back to HSBC, which recorded a pre-tax loss of 236 million euros last year, to make a profit over the next three years and target a return on capital. own two digits, Shehadeh said. There will be no forced layoffs over the next three years, he added.
Once profitable, the business could be sold, Shehadeh said. While stressing that Cerberus was a long-term investor, the head of MyMoneyGroup said that one possibility was that other French banks could possibly see it as a way to gain “more market share”. . . become number one or number two ”.
Cerberus, named after the many-headed dog that guards the gates of the Greek underworld, was founded in 1992 and today manages around $ 50 billion in assets.
HSBC’s exit from the French retail market is probably not the last of foreign banks. Dutch lender ING said this week it was conducting a strategic review of its retail business in France.
MyMoneyGroup was advised by Goldman Sachs and Rothschild with Cleary Gottlieb Steen on the legal side. HSBC was advised by Lazard.