MARKET REPORT: HSBC racks up £1.6bn loss in French sell-off

There was relief all around for HSBC investors as it inched closer to selling its French retail bank to controversial private equity firm Cerberus Capital Management. 

The bank has been trying to offload the loss-making unit for over a year, as it focuses on Asia.

HSBC revealed yesterday that it had signed a ‘memorandum of understanding’ to sell the business to Cerberus for a token sum of just €1. 

The deal values the assets of HSBC’s French bank at £1.4billion, and will generate a loss of £1.6billion for HSBC. Its shares slid 2.3 per cent, or 10p, to 429.4p. 

Cerberus’s My Money Group will be acquiring the HSBC unit, which consists of 244 branches with around 800,000 customers. 

It will also be snapping up the Credit Commercial de France brand, which it plans to revive. 

But French customers may understandably be cautious, as Cerberus has been branded a ‘hound of hell’ by MPs in the UK for buying chunks of mortgages from banks during the financial crisis and trapping borrowers on sky-high rates. 

The FTSE 100 took a battering, slipping 1.9 per cent, or 135.96 points, to 7017.47. Inflation was the number one concern for investors, and has dominated chatter all week. 

As a result there were just a handful of risers, after a key central banker in the US hinted he was leaning towards an interest rate rise in 2022 – much sooner than expected. James Bullard, president of the St Louis Fed, said he would go ‘meeting by meeting to see what happens’ and judge whether the Fed needed to hike rates to tame inflation. 

Higher interest rates tend to spook investors, as it means higher payments for companies which have loaded on the debt. 

Pharmaceuticals giant Astrazeneca was near-flat, after both it and the European Union claimed victory in their long-running Covid vaccine battle. The EU had accused Astra of not producing jabs fast enough, after the manufacturer had to revise down its delivery targets to the bloc. 

A Belgian court ruled Astra must deliver 80.2m shots to the EU by mid-September, far fewer than the 120m the EU had requested. Astra rose 0.01 per cent, or 1p, to 8384p. 

The FTSE 250 slipped by 0.9 per cent, or 210.95 points, to 22,324.19. One of its better-performing members was car dealership Inchcape, which motored higher on the back of stronger demand as lockdown restrictions began to ease. 

It said performance since April had ‘exceeded our expectations’, and rose 3.1 per cent, or 23.5p, to 786p. 

A rare positive note on budget airlines from HSBC did little to lift the fortunes of London-listed stocks. The airlines have taken a beating over the past year due to lockdowns grounding their planes but, sounding a note of optimism, HSBC said that ‘reopening appears imminent’. 

Analysts said: ‘While UK policy is not easily predicted, we expect UK travel restrictions to ease.’ 

It upgraded its recommendations on Ryanair and Easyjet from ‘hold’ to ‘buy’. But Ryanair still dipped 1.3 per cent, or 20 cents, to 16.51 euros, and Easyjet slipped 0.6pc, or 5.6p, to 968p. HSBC also upgraded Wizz Air from ‘reduce’ to hold, which helped the stock climb 2 per cent, or 95p, to 4932p. 

Cruise company Carnival announced it was pushing ahead with some of its travel operations in the US. But shares still slipped 1.4 per cent, or 24.6p, to 1736p. 

At the smaller end of the market, Telecom Plus, which offers customers all their home bills such as gas, electricity and broadband under the Utility Warehouse brand, fell 4.9 per cent, or 60p, to 1158p after unveiling full-year results. 

Revenue slipped 1.7 per cent to £861.2m in the year to March 31, and profit fell 9.6 per cent to £43.5m, as the pandemic weighed on the company’s performance.