HSBC exits Brazil as group profit falls

[HONG KONG] HSBC has agreed to sell its Brazilian business to local group Banco Bradesco, the British banking giant announced Monday alongside news of a fall in net profits.

Profit after tax fell 3.8 per cent to US$4.36 billion in the second quarter compared with the same period last year, said HSBC, which is selling the Brazilian unit for US$5.2 billion to slash costs.

The Asia-focused lender, which is looking also at potentially switching its headquarters away from Britain, added that it had put aside further funds to cover potential costs linked to ongoing probes into a series of scandals.

Sale of the Brazilian unit meanwhile comes after Europe's biggest bank announced in June that it would cut its global workforce by up to 50,000 as it also exits Turkey.

The sale "represents a significant step in HSBC's stated goal to optimise its global network and reduce complexity", the company said in a statement.

Chief executive Stuart Gulliver added that it "achieves both a solid financial outcome and swift delivery of one of our stated actions".

In the first half of 2015, net profit dropped 1.3 per cent to US$9.74 billion, although the company emphasised a rise in pre-tax profits, which climbed 10 per cent in the first six months of the year.

"HSBC reported better than expected mid-term results," said analyst Francis Lun, boss of GEO Securities.

"Pre-tax earning was something like 10 per cent up from last year. It represents a significant improvement," he told AFP.

HSBC is also mulling the relocation of its London headquarters, with the review due to be completed by the end of the year.

The bank says it has been hit hard by the British government's banking sector levy, which cost it US$1.1 billion in 2014.

And it argued that state plans to scrap the levy would be offset by higher corporation tax for the sector.

Shares in HSBC were up 0.78 per cent at 584.20 pence in afternoon deals on London's FTSE 100 index, which was flat overall.

The bank faces uncertainties in the second half of the year, according to Jackson Wong, associate director for Simsen Financial Group.

"A lot of things could happen. For one, the (slowdown) of the Chinese market could have an impact on the world banking system.

"Also, by the end of this year we should be able to know whether they will relocate their headquarters from London" with Hong Kong seen as a strong possibility, he added.

HSBC on Monday said it was "co-operating with the relevant authorities" over several investigations in the United States and elsewhere.

It added that a further US$1.14-billion provision was put aside for regulatory settlements, including almost US$800 million for the forex probes.

HSBC was already fined late last year by US and British regulators for attempting to rig foreign exchange markets.

In February, it was forced to apologise for "unacceptable" failings at its Swiss division following allegations that the unit helped rich clients hide billions from the taxman.

It has faced a storm over claims that it helped clients from around the world dodge taxes on accounts containing 180 billion euros (US$204 billion) between November 2006 and March 2007, in cases that are being investigated in several countries.

Separately, the Asia-focused lender is facing a French criminal probe over the affair.

"There are many factors that may affect the range of outcomes, and the resulting financial impact, of these investigations and reviews, which could be significant," the bank said Monday.

AFP