ECONOMY

HSBC takes $3bn hit to exit French retail business

HSBC is taking a $3bn hit to exit its French retail banking network, selling the business to US private equity group Cerberus.

The sale follows protracted negotiations with Cerberus, which is buying HSBC’s 244 branches and 800,000 customers in France through its subsidiary MyMoneyGroup, a consumer lending group.

The deal is the latest step in HSBC’s plan to increase its focus on Asia while slashing costs in the west, including 35,000 jobs in Europe and the US. The bank last month sold its 150-branch US retail network.

The transaction with Cerberus will see HSBC book a pre-tax loss of roughly $2.3bn alongside a $700m charge relating to impairment of goodwill, the bank said in a statement on Friday.

For Cerberus, the deal is its next bet on European banking. The New York-based buyout firm is already one of the largest shareholders in Germany’s Deutsche Bank and Commerzbank and has the biggest holding in Hamburg Commercial Bank.

Eric Shehadeh, the chief executive of MyMoneyGroup, said the group plans to resurrect the Crédit Commercial de France brand, which HSBC brought for €11.1bn in 2000. “The CCF brand is a game changer. And to rejuvenate the French brand is totally within our strategy,” said Shehadeh.

At the time HSBC took control, CCF boasted high-end customers and as well as a handful of regional banks. Over the past two decades, HSBC sold off CCF’s regional banks, for €2.1bn, its headquarters on the Champs-Elysées for €400m and folded some of its operations into those of the wider group.

Critics say HSBC neglected the brand and failed to invest enough in the business, prompting Cerberus to demand investment from HSBC during the sale negotiations that have been continuing since late last year.

The newly branded CCF and MyMoneyGroup will have a combined core equity tier one ratio — an important measure of balance sheet strength — of above 15 per cent. 

Cerberus, which created MyMoneyGroup after buying General Electric’s French consumer credit business in 2016, will also spend €200m “overhauling digital architecture” of CCF.

The plan is to return the business it is buying from HSBC, which had a pre-tax loss of €236m last year, to profit over the next three years and target a double digit return on equity, said Shehadeh. There will be no forced redundancies for the next three years, he added.

Once profitable, the business could be sold, said Shehadeh. While stressing that Cerberus was a long-term investor, the MyMoneyGroup chief said one possibility was that other French banks might eventually look at it as a way to get “more market share . . . to become number one or number two.”

Cerberus, named after the multi-headed dog that guards the gates of the Greek Underworld, was founded in 1992 and now has about $50bn in assets under management. 

HSBC’s exit from the French retail market is likely not the last by foreign banks. Dutch lender ING said this week that it is conducting a strategic review of its French retail business.

MyMoneyGroup was advised by Goldman Sachs and Rothschild with Cleary Gottlieb Steen on the legal side. HSBC was advised by Lazard.

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