Friday, February 29, 2008

HSBC Gets $3.2 Billion Bid for French Regional Units

HSBC Gets $3.2 Billion Bid for French Regional Units

Feb. 29 (Bloomberg) -- HSBC Holdings Plc, Europe's biggest bank by market value, may sell its French regional consumer- banking network to Banque Federale des Banques Populaires for 2.1 billion euros ($3.2 billion) as it focuses on faster growth in French cities and emerging markets. HSBC is in exclusive talks and has got a ``firm'' cash offer for what would be its biggest sale ever, the London-based bank said today in a statement. The price is 21 times the units' after-tax earnings last year and 3.7 times shareholders' equity on Dec. 31, HSBC said. The 400 branches generated less than 20 percent of French pretax profit last year. The London-based bank aims to earn 60 percent of pretax profit from emerging markets, up from about 50 percent in the first half of 2007. In the U.S., it has cut lending, closed mortgage units and changed management to curtail bad debts from subprime consumers. It may need to add $13 billion to provisions, Goldman Sachs Group Inc. analysts wrote last month. The French sale ``is logical, it is consistent with their strategy,'' said Derek Chambers, an analyst at Standard & Poor's Equity Research Ltd. in London who has a ``hold'' rating on the stock. ``The real challenge is to sort out the U.S.'' The regional banks are Societe Marseillaise de Credit; Banque de Savoie; Banque Chaix; Banque Marze; Banque Dupuy, de Parseval; Banque Pelletier; and Credit Commercial du Sud-Ouest, the company said. They had assets worth 8.38 billion as of Dec. 31 and generated net income of 100 million euros last year. They have 400 branches and 2,950 people.

`Faster Growing Businesses'

``This offer is an opportunity for HSBC to redeploy capital to other investments as we pursue our strategy and rebalance our activities towards emerging markets and faster growing business segments,'' HSBC Chairman Stephen Green said in the statement. There are still ``significant opportunities'' for banking in urban France through HSBC's international network, Green said. HSBC fell 1.8 percent to 766 pence in London trading as of 1:40 p.m. The company is down 9.1 percent this year, valuing it at 90.8 billion pounds ($179 billion). Banque Federale des Banques Populaires is the central coordinating unit of Groupe Banque Populaire, a network of regional lenders that isn't traded. ``This acquisition allows Groupe Banque Populaire to improve its growth prospects in retail banking,'' Banque Populaire Chairman Philippe Dupont said in the statement. ``We intend to retain the brands of the regional banks and their individual identities.''HSBC reports full-year earnings on March 3. It plans to complete its $6.45 billion acquisition of Korea Exchange Bank from U.S. buyout firm Lone Star Funds in April.

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