HSBC has decided to divest its Argentine operations, taking a significant hit with a $1 billion loss due to the country’s fluctuating exchange rates. The sale to Grupo Financiero Galicia, a leading private financial entity, involves over 100 branches and 3,100 staff members of HSBC Argentina. This move comes amid Argentina’s soaring annual inflation rate, which reached 276.2% last month, marking the highest globally.
A dramatic depreciation of the Argentine peso against the dollar has been observed; what was once 43 pesos to the dollar five years ago, has escalated to over 860 pesos today. HSBC’s journey in Argentina began in 1997 with the acquisition of Banco Roberts, renaming it HSBC Argentina, and marking its expansion into Latin America which included purchasing Brazil’s Bamerindus bank. However, HSBC shifted its focus away from retail banking in Brazil in 2015, now operating solely as an investment bank there.
The London-based banking corporation has been realigning its strategy towards more rapidly growing markets in Asia, leading to the disposal of several of its international operations. The Argentine business sale, valued at $550 million, is expected to result in a $1 billion loss in the first quarter’s financial results, with potential variations due to hyperinflation and currency translation adjustments. Additionally, HSBC anticipates recognizing $4.9 billion in losses from historical currency translation reserves over the next 12 months, a figure that grew by $1.8 billion in 2023 alone.
Noel Quinn, HSBC’s CEO, commented on the sale as a strategic move allowing the bank to concentrate on more lucrative opportunities within its global network. He noted HSBC Argentina’s limited integration with the bank’s international operations and its role in generating significant earnings volatility when accounting for results in US dollars. Quinn highlighted that Grupo Financiero Galicia is in a better position to nurture and expand the business.
