By Lawrence White
LONDON (Reuters) -HSBC on Wednesday announced newly negotiated terms that could pave the way for a strategically-important sale of its French retail banking business, after the transaction stalled earlier this year on regulatory capital concerns.
HSBC (LON:HSBA) said the indirect shareholder of Cerberus-backed My Money Group, which is buying HSBC's French retail bank, will inject 225 million euros ($244.22 million) of capital into the combined entity in a bid to fulfil regulatory requirements.
HSBC will also retain a portfolio of home loans worth around 7 billion euros, originally earmarked as part of the deal and which it said it might still look to sell at a later date.
The revised terms of the deal partly reflect the fact that interest rates have risen since the two parties originally signed the agreement in June 2021, making the French retail banking business more attractive.
As part of the deal HSBC will now also receive a profit participation interest of 1.25 times the amount invested, in exchange for investing up to 407 million euros of capital into My Money Group's top holding company.
HSBC has also negotiated a long term agreement to license the Crédit Commercial de France (CCF) brand to the buyer.
HSBC announced the proposed France deal in June 2021 at a nominal price of one euro, as part of a retreat from slow-growing European and North American markets where it has struggled against larger domestic players.
HSBC is considering exiting as many as a dozen countries, Reuters reported last month.
The British lender said it now expects to incur a pre-tax loss on the sale of up to $2.7 billion, up from $2.3 billion when it originally announced the deal, albeit the final loss will depend on prevailing interest rates at the time.
The bank also said it will incur around $100 million of further costs associated with retaining the mortgages originally earmarked for sale, net of gains from the brand licensing agreement.
Both sides' executive boards have signed off on the new terms of the deal, which remains subject to regulatory approvals, and which the two sides aim to close on January 1 2024.
HSBC shares were up 0.5% on Wednesday afternoon following the announcement, underperforming the STOXX index of 600 European banks which was up 1.2%.
($1 = 0.9213 euros)