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On Thursday, Financial Times reported that HSBC Holdings Plc (HBC - Analyst Report) is planning to sell its Losango consumer finance unit in Brazil, in yet another attempt to shed its non-core assets and improve efficiency.
Presently, HSBC’s Losango unit has nearly 20 million clients and controls about 20% of the market share in Brazil’s consumer loan segment. Hence, some of the local banks interested in acquiring the HSBC unit include Banco Bradesco S.A. (BBD - Snapshot Report), Itau Unibanco Holding S.A. (ITUB - Analyst Report) and Banco Santander Brasil, the local unit of Spanish bank.
HSBC had acquired Losango in 2003 as a part of the agreement to buy Lloyds Banking Group Plc’s (LYG - Snapshot Report) Brazilian assets. The company’s main strategy is to focus in more profitable areas in Brazil and South America that include investment and commercial banking operations.
HSBC’s plan to restructure and prune is global business is in sync with its long-term strategy to reduce its operating expenses by $3.5 million by the end of 2013, which was announced by its CEO, Mr. Stuart Gulliver, in May.
In August, HSBC announced 30,000 layoffs over the next two years. Further, the company also announced the sale of its 195 non-strategic branches to First Niagara Financial Group Inc. (FNFG - Snapshot Report) for $1 billion in cash, and its U.S. credit card business to Capital One Financial Corporation (COF - Analyst Report) for $32.7 billion.
Additionally, in September, HSBC announced the sale of its Canadian retail brokerage business to National Bank Financial and its Chilean retail banking business to Itau Unibanco.
The planned divestiture of the Brazilian consumer finance business will not only bring long-term benefits for HSBC but also help the company concentrate on its emerging market strategy. Also, we expect HSBC to continue with such strategic sale of business units, thereby enhancing its capital strength going forward.
Currently, HSBC retains a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating.
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