HSBC $5.2 Billion Brazil-Unit Sale Gets Deeper Antitrust Review

  • Regulator to examine the deal's impact on competition
  • Sale to Bradesco increases banking concentration in Brazil

HSBC Holdings Plc’s sale of its Brazil unit to Banco Bradesco SA will require a deeper look from the nation’s antitrust regulator, which is extending its inquiry into the $5.2 billion transaction to gauge the effects on competition in the banking industry.

Cade, as the regulator is known, told its economic department to study the transaction, according to a statement published Monday in the government newspaper Diario Oficial. The authorities will also require the two banks to detail efficiency gains generated by the transaction and provide studies showing how they could mitigate regulators’ concerns about diminished competition.

The deal “boosts banking concentration in Brazil, which generates the need to carefully analyze eventual price increases for financial and non-financial products,” Cade said in a Jan. 28 report posted on its website. The regulator said it had 240 days to analyze the deal, starting from Oct. 27, which would mean a decision would be announced by the end of June. Cade said it may extend that deadline further.

Officials at Cade and London-based HSBC declined to comment on the review. An official at Osasco-based Bradesco said the company doesn’t comment on matters under review by regulators.

New Branches

Bradesco’s agreement to buy HSBC’s Brazil unit in August was its biggest acquisition ever, adding about 850 branches and 179.5 billion reais ($45 billion) in assets after it lost market share to federally controlled Banco do Brasil SA and Caixa Economica Federal. The two banks expanded credit faster than non-state-owned competitors by charging lower interest rates.

HSBC started its retail operation in Brazil in 1997 with the purchase of Banco Bamerindus do Brasil SA, which was based in Curitiba, the capital of Parana state, about 400 kilometers (250 miles) south of Sao Paulo.

Brazil’s central bank approved the Bradesco transaction last month. The bank expects the deal to be approved by Cade in coming months, Bradesco’s executive managing director, Luiz Carlos Angelotti, told reporters last week.

Bradesco has declined 32 percent since it agreed to acquire HSBC, compared with an 18 percent drop for Itau Unibanco Holding SA and 20 percent for the Ibovespa benchmark index.

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