HSBC plans to sell its US retail banking business

HSBC Holdings (HSBC -0.51% ) was planning to sell its consumer unit in the United States, according to several media outlets.

The bank, which was founded in Hong Kong but is now based in London, is Europe’s largest bank by market capitalization and has nearly $3 trillion in total assets.

Its US banking franchise, with around $200 billion in assets, represents less than 7% of the bank’s total assets. Citing an unnamed source, Bloomberg reported on Sunday that the bank is not expected to sell all of its US operations.

Image source: HSBC Holdings

HSBC’s US consumer unit is relatively small compared to the entire US division, with just over $20 billion in total assets, most of which are residential mortgages. But the wealth management operation is also now part of retail banking and could be included in a sale, according to Bloomberg.

HSBC’s US operations have struggled to generate profitability in recent years, with extremely poor performance metrics and a poor expense structure as well.

Earlier this year, the bank announced it would launch a restructuring that would involve laying off 15% of its total U.S. workforce by the end of 2021 and attempt to reduce gross operating costs by 10% to 15% by 2022. The division also wrote down $785 million of its goodwill in the first quarter of the year.

HSBC may view the current environment as a good time to offload some of its US business as US banking mergers and acquisitions activity picks up.

Recently, the Spanish lender Banco Bilbao Vizcaya Argentaria sold its US banking business in an all-cash deal valued at $11.6 billion. This valued BBVA USA, another underperforming bank, at 135% tangible book value.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

Comments are closed.