By Guillermo Parra-Bernal and Pamela Barbaglia
SAO PAULO/LONDON (Reuters) - HSBC Holdings Plc (L:HSBA) could select a preferred bidder for its struggling Brazilian unit as early as next month, with the sale expected to be finalised by August, three sources with knowledge of the process said.
HSBC expects to get any binding offers for the unit late in June, said the sources, who requested anonymity to speak freely about the process. The sale could then gain traction rapidly since the unit only owns a small fraction of Brazil's banking system assets, the sources noted.
Ultimately, bidders will set a price for the unit, which is formally known as HSBC Bank Brasil Banco Múltiplo SA, based on how rapidly they expect it to return to profitability, the first and second sources said. Bids for the unit may not surpass book value, which is estimated at around 10 billion reais (£2.1 billion) as of now, they said.
News of an imminent sale comes after HSBC Chief Executive Officer Stuart Gulliver has targeted Brazil, Mexico, Turkey and the Unites States as potential markets for unit disposals. HSBC hired Goldman Sachs Group Inc (NYSE:GS) to manage the transaction.
HSBC Bank Brasil, the nation's seventh-largest commercial lender, lost a net 442 million reais last year.
The three sources said that Banco Bradesco SA (SA:BBDC4), Banco Santander (MADRID:SAN) Brasil SA (SA:SANB11) and Grupo BTG (LONDON:BTG) Pactual SA (SA:BBTG11), all private-sector lenders based in Brazil, have had access to the sale's preliminary documents. Canada's Bank of Nova Scotia (TO:BNS) had initially shown interest in the unit, although it fizzled in recent weeks, the first source noted.
BTG Pactual, the largest investment bank in emerging markets, would only be interested in "pieces of the unit, namely the asset and wealth management operations," the first source noted, adding that HSBC "is unlikely to agree to a break-up."
According to the second source, there is a "fair amount" of interest from Chinese bidders, which are seen as capable to place aggressive bids to outbid HSBC Brasil's domestic rivals.
Industrial & Commercial Bank of China Ltd (SS:601398) is considering a bid for the unit, the first source noted, adding that China Construction Bank Corp (SS:601939) remains "very distracted" with headwinds in its acquisition of Brazil's Banco Industrial e Comercial SA.
HSBC and Goldman Sachs declined to comment as did Bradesco and BTG Pactual. Santander Brasil does not comment on market speculation, a spokeswoman said on Wednesday.
Efforts to obtain comments from ScotiaBank, as the Canadian lender is known, as well as Chinese lenders ICBC and CCB were unsuccessful.
(With additional reporting by Aluísio Alves in Sào Paulo Editing by W Simon)