HSBC offloads Argentina arm at a hefty loss as South American country is racked by hyperinflation

HSBC has agreed to sell its operations in hyperinflation-plagued Argentina in a deal that will deliver a multi-billion pound hit to its profits.

Boss Noel Quinn said the bank’s business in the South American country has generated ‘substantial earnings volatility’ for the wider group.

The sale to Argentina’s Grupo Financiero Galicia – the country’s fifth biggest lender – comes as Quinn seeks to streamline the global group, which today is increasingly focused on Asia. 

It follows previous disposals of its businesses in France and Canada.

Meanwhile, Argentina’s radical president – the self-described ‘anarcho-capitalist’ Javier Milei – is grappling to bring down the country’s inflation rate of 276 per cent by slashing spending, while interest rates stand at a painful 80 per cent.

HSBC boss Noel Quinn said the bank’s business in Argentina has generated ‘substantial earnings volatility’ for the wider group

HSBC Argentina, which covers banking, asset management and insurance, employs more than 3,000 staff and has more than 100 branches.

The sale of the business for £430million is expected to complete in the next 12 months.

HSBC said it would take a £800million loss on the sale in its first-quarter results this year but the final figure will vary between now and the completion date dependent on factors including ‘hyperinflation and foreign currency translation’.

The group also expects to swallow a £3.9billion hit relating to the plunging dollar value of the business caused by the slump in the peso over recent years. That figure increased by £1.4billion last year alone.

Quinn said: ‘HSBC Argentina is largely a domestically focused business, with limited connectivity to the rest of our international network.

‘Furthermore, given its size, it also generates substantial earnings volatility for the group when its results are translated into US dollars. Galicia is better placed to invest in and grow the business.’

Quinn said the bank remained committed to the US – where it quit retail banking in 2021 – and to Mexico, where its business has in the past come under a shadow as a result of lax money laundering controls, which saw it fined £1.6billion by US regulators in 2012.

London-listed HSBC has faced pressure from investors over its global strategy.

Last year, it defeated a resolution by Hong Kong-based shareholders – backed by Chinese major investor Ping An – to spin off its Asia business.

Shore Capital banking analyst Gary Greenwood said: ‘Argentina has been a problematic market for HSBC in recent years. 

Exiting Argentina also represents a further step in management’s strategy to simplify the group.’