HSBC Brazil sale receives regulatory approval

HSBC’s planned sale of its Brazil business to Bradesco reached a new milestone on Thursday, as the bank announced it has received unanimous approval from the Brazilian Administrative Council for Economic Defence.

The FTSE 100 bank had announced its agreement to sell its entire business in Brazil to Banco Bradesco for an all-cash consideration of $5.2bn on 31 August last year.

Official publication of the competition agency decision is expected to happen before 14 June, with Bradesco and HSBC planning to complete the transaction in early July.

“The sale of HSBC Brazil represents a significant step in HSBC’s stated goal to optimise its global network and reduce complexity,” the bank’s board said in a statement.

“The transaction is expected to decrease group risk weighted assets by around $37bn and increase the group’s common equity tier 1 ratio by around 65 basis points.”

HSBC said it plans to maintain a presence in Brazil to serve large corporate clients, with respect to their international needs.

The bank said that, based on the net assets of HSBC Brazil including allocated goodwill on 31 March of $4.3bn, the transaction will generate a net gain on sale of $0.6bn before the recycling of foreign exchange losses previously recognised in other comprehensive income.

“After the recycling of foreign exchange losses, there would be an accounting loss on the sale of $1.7bn,” the board said.

“Neither the allocated goodwill nor the recycling of foreign exchange losses impact the regulatory capital that will be generated from the disposal at group level.