We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
HSBC to Exit U.S. Retail Banking Business, Sell 90 Branches
Read MoreHide Full Article
HSBC Holdings plc (HSBC - Free Report) has announced a strategic plan that includes the divestiture of 90 of its branches, as part of the bank’s effort to exit the U.S. retail banking business. Further, the company intends to retain 20-25 branches, which will be restructured into international wealth centres. Besides, the bank will close the remaining 35-40 branches.
As part of the divestiture plan, HSBC inked two separate transactions with Citizens Financial Group, Inc. (CFG - Free Report) and Cathay General Bancorp (CATY - Free Report) . The financial terms of both deals, expected to close in the first quarter of 2022, have not been revealed yet. Further, both are still subject to regulatory approvals.
Noel Quinn, Group CEO of HSBC, said, "We are pleased to announce the sale of the domestic mass market of our US retail banking business. They are good businesses, but we lacked the scale to compete. Our continued presence in the US is key to our international network and an important contributor to our growth plans. This next chapter of HSBC’s presence in the US will see the team focus on our competitive strengths, connecting our global wholesale and wealth management clients to other markets around the world."
Deal Details & Benefits
HSBC projects pre-tax costs of $0.1 billion to be incurred, with no anticipation of generating substantial gain or loss. In addition, risk weighted assets (on a PRA basis) related to the announced deals were $1.8 billion as of Mar 31, 2021. Also, the company doesn’t expect any material impact of these deals on its Common Equity Tier 1 ratio.
As a result of this divesture, Citizens Financial will acquire 80 East Coast branches, and add roughly 800 thousand new customers. Additionally, the company, through Citizens Bank, will assume $9.2 billion and $2.2 billion of deposits and loans, respectively as of Mar 31, 2021. The transaction will likely be instantly accretive to the bank’s earnings and lead to an internal rate of return of nearly 20%.
Meanwhile, Cathay Bank, the subsidiary bank of Cathay General Bancorp, will take over 10 West Coast branches and have about 50K customer relationships. Also, it will get hold of $1 billion in deposits and $0.8 billion of outstanding loans as of Mar 31, 2021. The transaction is projected to be 2% accretive to Cathay General Bancorp's GAAP earnings, on a run-rate basis (excluding the one-time transaction costs and restructuring expenses) in 2022.
Over the past six months, shares of HSBC have gained 21.8%, underperforming the industry’s 25% rally.
HSBC’s transformation plan is aimed at reshaping its underperforming businesses, simplifying complex organization and reducing costs. It will further improve the operating efficiency. Hence, exiting the U.S. retail banking business is a step in the same direction.
Similar Action by Other Bank
After receiving bids from many firms within Europe and the United States for its asset management business, Societe Generale (SCGLY - Free Report) finally announced the divestiture of Lyxor Asset Management, to Amundi for $979 million in April. As part of the transaction, the sale will include Lyxor’s ETFs and other active and alternative management activities for institutional clients in the country and abroad.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency have sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
Image: Bigstock
HSBC to Exit U.S. Retail Banking Business, Sell 90 Branches
HSBC Holdings plc (HSBC - Free Report) has announced a strategic plan that includes the divestiture of 90 of its branches, as part of the bank’s effort to exit the U.S. retail banking business. Further, the company intends to retain 20-25 branches, which will be restructured into international wealth centres. Besides, the bank will close the remaining 35-40 branches.
As part of the divestiture plan, HSBC inked two separate transactions with Citizens Financial Group, Inc. (CFG - Free Report) and Cathay General Bancorp (CATY - Free Report) . The financial terms of both deals, expected to close in the first quarter of 2022, have not been revealed yet. Further, both are still subject to regulatory approvals.
Noel Quinn, Group CEO of HSBC, said, "We are pleased to announce the sale of the domestic mass market of our US retail banking business. They are good businesses, but we lacked the scale to compete. Our continued presence in the US is key to our international network and an important contributor to our growth plans. This next chapter of HSBC’s presence in the US will see the team focus on our competitive strengths, connecting our global wholesale and wealth management clients to other markets around the world."
Deal Details & Benefits
HSBC projects pre-tax costs of $0.1 billion to be incurred, with no anticipation of generating substantial gain or loss. In addition, risk weighted assets (on a PRA basis) related to the announced deals were $1.8 billion as of Mar 31, 2021. Also, the company doesn’t expect any material impact of these deals on its Common Equity Tier 1 ratio.
As a result of this divesture, Citizens Financial will acquire 80 East Coast branches, and add roughly 800 thousand new customers. Additionally, the company, through Citizens Bank, will assume $9.2 billion and $2.2 billion of deposits and loans, respectively as of Mar 31, 2021. The transaction will likely be instantly accretive to the bank’s earnings and lead to an internal rate of return of nearly 20%.
Meanwhile, Cathay Bank, the subsidiary bank of Cathay General Bancorp, will take over 10 West Coast branches and have about 50K customer relationships. Also, it will get hold of $1 billion in deposits and $0.8 billion of outstanding loans as of Mar 31, 2021. The transaction is projected to be 2% accretive to Cathay General Bancorp's GAAP earnings, on a run-rate basis (excluding the one-time transaction costs and restructuring expenses) in 2022.
Over the past six months, shares of HSBC have gained 21.8%, underperforming the industry’s 25% rally.
Currently, HSBC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our Take
HSBC’s transformation plan is aimed at reshaping its underperforming businesses, simplifying complex organization and reducing costs. It will further improve the operating efficiency. Hence, exiting the U.S. retail banking business is a step in the same direction.
Similar Action by Other Bank
After receiving bids from many firms within Europe and the United States for its asset management business, Societe Generale (SCGLY - Free Report) finally announced the divestiture of Lyxor Asset Management, to Amundi for $979 million in April. As part of the transaction, the sale will include Lyxor’s ETFs and other active and alternative management activities for institutional clients in the country and abroad.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency have sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 3 crypto-related stocks now >>