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Talks For Sale Of Loss Making HSBC’s French Retail Business In Final Leg: Reports

Talks For Sale Of Loss Making HSBC’s French Retail Business In Final Leg: Reports
According to a report published in the news agency Reuters, French retail arm of the lender HSBC has been agreed to be bought by Cerberus and a rival investment firm for a symbolic one euro. However the precondition of the prospective buyers is that the British bank also makes an investment of more than 500 million euros or $582.70 million into the business.
The sale of its 270 retail branches in France, which HSBC is trying to achieve by working with Lazard, is a part of the strategy of the bank’s Chief Executive Noel Quinn to cut down on costs all throughout the banking group.
It has been difficult for the bank to attract interest in the unit because bidders are concerned about the heavy restructuring that is believed to be necessary and complexity of negotiations with the local French regulators.
The reasons mentioned above have forced away French banks from showing interest in the business after initially examining and considering the dossier and Cerberus and the other investor are the only bidders for the business that are left in the process claimed the report quoting sources which knowledge of the matter. The sources however did not name the other investor, th Reuters report claimed.
There were no comments available from Cerberus and HSBC.
The business is under a strategic review, HSBC has previously said.
Reports stated that an injection of at least 500 million euros from HSBC for complete recapitalized of the business has been demanded by both bidders. The suitors have demanded that this investment needs to be made by HSBC prior to any possible deal for a symbolic amount of one euro.
"The price is going to be disastrous for HSBC," said the reports quoting the sources.
The reports however warned that the deal could fall off because of strict regulatory demands and the possibility of large job cuts even as the British lender continued to work hard to reach an agreement by the end of the year.
Concerns about the economic impact of a second wave of COVID-19 have freshly pressurized European bank share prices with a record low being hit on Friday by the STOXX 600 bank index and the possible closure of the deal comes amid such an environment in the European banking business.
A 225 million adjusted loss before tax was reported by its private banking and wealth management business, HSBC France said in its first half results.
According to analysts, if HSBC is unable to close the deal it would deal a significant blow to its restructuring plans with the bank attempting to complete the latest of a series of asset disposals in recent years targeted to enhance the returns for long-suffering shareholders by shedding underperforming businesses.

Christopher J. Mitchell

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