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HSBC in Advance Talks to Sell French Operations at a Loss

Per a Reuters report, HSBC Holdings HSBC is in advance talks to divest its French business, which has roughly 270 retail branches, at a loss. This business restructuring plan is part of the company’s efforts to streamline operations and improve operating efficiency.

Last October the company had reviewed and announced plans to sell its France-based retail unit. For this, HSBC began working with Lazard LAZ to find a prospective buyer.

Nonetheless, the bank is finding it difficult to garner sufficient interest for the unit. This is mainly owing to large scale restructuring necessary there and also for complicated regulatory requirements.

Now, the company is left with two bidders, U.S.-based Cerberus and an investment firm. These investors are ready to buy the business for symbolic €1 after HSBC infuses more than €500 million ($582.7 million) into it.

Notably, the French unit has been unprofitable for sometime, and the company is under pressure to do away with such businesses soon. While HSBC is trying to reach an agreement by the year end, adding fresh capital in to the unit will likely lead to huge loss.

The bank had announced its latest round of business restructuring initiatives in February, before put them on hold amid the coronavirus crisis. Later in July, it resumed the process, which is aimed at reshaping underperforming businesses, simplifying complex organization and reducing costs.

As part of the restructuring plan, HSBC aims to save $4.5 billion expenses by 2022 and shed $100 billion of RWAs by shrinking the U.S. and European operations, along with scaling back investment bank business.

Also, almost 35,000 job cuts are expected as part of the plan. With French retail business employing around 3,000 workers, the divestiture of the same is important to the company.

Shares of HSBC have lost 49% so far this year compared with 37% fall for the industry it belongs to.



Currently, HSBC carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Several other global banks including Credit Suisse, UBS Group UBS, NatWest Group and Deutsche Bank DB are undertaking measures to improve efficiency and save costs. These banks are resorting to branch closures, job cuts and divestiture of less profitable units to streamline their businesses.

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