HSBC Group has reached an agreement to acquire fellow UK-based bank Lloyds TSB’s Brazilian onshore and offshore companies and assets worth some US$2.7bn for an aggregate consideration of US$815mn.
“This acquisition will build on the significant investment HSBC has already made in Brazil and reflects the group’s wish to develop its presence in growth markets. It will represent an important step forward for our corporate and wholesale operations. It will allow us to develop what is already the leading consumer finance business in Brazil by deploying internationally, for the first time within HSBC, skills and techniques from the successful household model”, HSBC’s South America group general manager and HSBC Bank Brasil’s president Michael Geoghegan says.
The main part of the agreed transaction is the acquisition of 100% of the shares of Lloyd’s leading Brazilian consumer finance franchise Losango Promotora de Vendas (Losango) for US$451mn. HSBC acquired leading US-based consumer finance company Household International and high-level executives from the US-based company participated in the due diligence process at Lonsango to establish the potential synergy-related gains from future transfers of consumer finance know-how.
The move in Brazil is part of HSBC’s strategy to achieve an “equal split” in its global revenue stream between mature markets and fast-growing emerging markets. The deal is still pending regulatory approval from the Brazilian central bank and HSBC is unsure exactly when it will be able to take control of Lloyd’s Brazilian operations.
The deal will also see HSBC Bank Brasil assume substantially all the assets and liabilities (excluding equity) of Lloyds TSB’s Brazilian branch for a sum of R410mn (US$144mn), representing the net difference between such assets and liabilities. Furthermore, HSBC Bank will acquire certain Brazilian offshore loan assets held by Lloyds Bank for US$220mn while also taking over certain intra-group funding currently provided by Lloyds for its Brazilian businesses.
Lloyds has operated in Brazil for over 140 years and has specialised in two main areas: consumer finance through Losango, focusing on in-store, personal and car lending to some 7mn individual customers, serviced through 16,000 merchant outlets; and wholesale banking, providing financing and treasury services to local and multinational companies.
HSBC has operated in Brazil since 1997, when it established HSBC Bank Brasil (formerly Banco HSBC Bamerindus), which has more than 1,500 offices throughout Brazil. The bank provides a full range of personal financial services, including current accounts, insurance, credit card, loans and pensions, as well as services to small and medium-size enterprises and long-term relationships with major national and international corporations and institutions.