HSBC Holdings Plc, Europe’s largest bank by market value, agreed to sell its Panama unit to Bancolombia SA for $2.1 billion as Chief Executive Officer Stuart Gulliver tries to revive profit by targeting fewer markets.
The cash price for Panama’s second-biggest bank is three times the unit’s net asset value of $700 million, HSBC said yesterday in a statement. The London-based lender acquired most of its Panamanian operations when it bought Grupo Banistmo SA for $1.77 billion in 2006.
Gulliver, who became CEO in 2011, is focusing on Brazil, Mexico and Argentina in Latin America as part of a strategy to invest in economies where it has a greater market share as it cuts costs and sells assets elsewhere. HSBC completed the sale of its stake in Shenzhen, China-based Ping An Insurance (Group) Co. this month for about $9.4 billion.
“The sale is in line with the declared strategy of the bank of exiting non-core markets,” said Chirantan Barua, an analyst at Bernstein Research in London.“The interesting question for investors would be the use of the capital being freed up around the world -- where does it get deployed and if not, when does it return to shareholders?”
HSBC has announced 46 asset sales or closures since the start of 2011, including operations in Costa Rica, El Salvador and Honduras that it agreed to sell to Bogota-based Banco Davivienda SA in January 2012. Gulliver pledged in 2011 to increase return on equity, a measure of profitability, to at least 12 percent and is seeking to cut costs by $2.5 billion to $3.5 billion.
The bank agreed in May to sell four units in Latin America for about $400 million in cash to Colombia’s Banco GNB Sudameris SA. The transaction included businesses in Colombia, Peru, Uruguay and Paraguay, with a gross asset value of $4.4 billion at the end of 2011, HSBC said.
HSBC rose 0.4 percent to close at 728.80 pence yesterday in London, and has gained 13 percent this year, giving the bank a market value of 134.7 billion pounds ($207.7 billion).
Bancolombia’s purchase of the HSBC assets comes two months after the lender, Colombia’s biggest bank, said in December it would pay $216 million for a stake in a Guatemalan bank through Agromercantil Holding.
Colombian army victories over guerrillas in the past decade have opened swaths of countryside to overseas investment in mining and oil, which helped the country expand almost twice as fast as the average for Latin America’s three larger economies last year.
Bancolombia said this month it would propose a preferred stock sale at the Medellin-based lender’s annual meeting of shareholders in March. The bank may seek to raise $1 billion to meet stricter capital requirements and to fund acquisitions, Banco Santander SA analysts Boris Molina and Luis Guzman wrote in a report on Feb. 12.
HSBC Bank (Panama) SA had about $7.6 billion of assets, $5.7 billion of loans and $5.8 billion of deposits as of Sept. 30, the bank said. The deal will be completed in the third quarter of the year, HSBC said.
The lender on Dec. 11 agreed to pay $1.92 billion to settle U.S. probes of money laundering in the largest such accord, topping the $619 million in penalties paid in June by the Netherlands’ ING Groep NV.
UBS Investment Bank and Banca de Inversion Bancolombia advised Bancolombia on the deal, according to an e-mailed statement.