FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the
month of June
HSBC Holdings plc
42nd
Floor, 8 Canada Square, London E14 5HQ, England
(Indicate
by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F).
Form
20-F X Form 40-F
(Indicate
by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934).
Yes
No X
(If
"Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-
).
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART,
DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM ANY JURISDICTION WHERE
TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of
Hong Kong Limited take no responsibility for the contents of this
announcement, make no representation as to its accuracy or
completeness and expressly disclaim any liability whatsoever for
any loss howsoever arising from or in reliance upon the whole or
any part of the contents of this announcement.
Hong Kong Stock Code: 5
18 June 2021
HSBC HOLDINGS PLC
HSBC ANNOUNCES SALE
OF RETAIL BANKING BUSINESS IN FRANCE
HSBC
Continental Europe ('HBCE') has today signed a Memorandum of
Understanding ('MOU') regarding the potential sale of HBCE's retail
banking business in France.
The
potential sale includes: HBCE's French retail banking business; the
Crédit Commercial de France brand; and, subject to the
satisfaction of relevant conditions, HBCE's 100% ownership interest
in HSBC SFH (France) and its 3% ownership interest in Crédit
Logement (together, the 'Business'). The potential sale is
structured such that it may proceed even if the relevant conditions
to transfer HSBC SFH and/or the 3% ownership interest in
Crédit Logement are not satisfied. The potential sale would
not include HBCE's life insurance or asset management manufacturing
businesses. HBCE, through its subsidiaries, would enter into
distribution agreements with the Purchaser for insurance and asset
management products.
The
Business consists of a network of 244 retail branches, serving
800,000 customers at 31 December 2020. At 31 December 2020, the
Business had customer loans balance of $26.2bn[1], customer deposits
balance of $23.1bn and credit risk-weighted assets ('RWAs') of
$7.1bn. It is anticipated that approximately 3,900 HBCE employees
would transfer with the Business in accordance with relevant
legislation.
Noel
Quinn, Group Chief Executive, said: "The signing of an MOU for the
potential sale of our French retail banking business represents a
significant step in progressing the actions we announced during our
strategic update earlier this year. It will enable us to
dramatically simplify our business in Continental Europe and allow
us to accelerate the transformation of our European wholesale
banking franchise. We are committed to remaining as a leading
international wholesale bank in Continental Europe, capitalising on
our global network and serving our multinational customers both
inbound and outbound."
The MOU
includes details of the parties' information and consultation
processes of their respective employees' works councils, which will
commence shortly. If, following the outcome of these processes, the
parties were to decide to proceed with the potential sale, they
would enter into a governing transaction agreement setting out
further terms for implementation, including regulatory approvals
and other conditions.
The
potential sale would be expected to complete in the first half of
2023. Financial impacts of the potential sale on the HSBC Group
(consolidated basis) are currently expected to be[2]:
●
An estimated pre-tax loss on
sale of c.$2.3bn, together with an additional $0.7bn impairment of
goodwill. There would be no immediate tax benefit recognised in
respect of the sale loss nor impairment. The vast majority of the
estimated
sales loss and
impairment is expected to be recognised upon the classification of
the Business as held for sale for accounting purposes, currently
anticipated to be in 2022, with any remaining elements recognised
by completion;
●
A reduction in the consolidated
common equity tier 1 ratio of approximately 15bps (based on HSBC's
Group RWAs at 31 December 2020), driven by the estimated loss on
sale partially offset by the reduction in RWAs upon completion;
and
●
A reduction in HSBC's Group
tangible net asset value (consisting of the estimated loss
excluding intangibles impairments) of an estimated $2.2bn upon
completion (based on the current estimate of the financial
impact).
None of
the current unsecured or subordinated debt issued by HBCE will
transfer to the Purchaser as part of the Potential
Transaction
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The Potential Transaction
Following a strategic review of HSBC's retail banking activities in
France, HBCE has today signed an MOU with Promontoria MMB SAS ('My
Money Group'), its subsidiary Banque des Caraïbes SA (the
'Purchaser') and My Money Bank ('MMB'), regarding the potential
sale of HBCE's retail banking business in France. My Money Group,
MMB and the Purchaser are under the control, directly or
indirectly, of funds and accounts managed or advised by Cerberus
Capital Management L.P.
The potential sale includes: HBCE's French retail banking business;
the Crédit Commercial de France ('CCF') brand; and, subject to
the satisfaction of relevant conditions, HBCE's 100% ownership
interest in HSBC SFH (France) ('HSFH') and its 3% ownership
interest in Crédit Logement (together, the 'Business') (the
'Potential Transaction').
The Business consists of a network of 244 retail branches, customer
loans and deposits balances associated with its retail banking
activities in France, and certain other assets and liabilities. If
the Potential Transaction were to proceed, the Purchaser intends to
operate the Business under the CCF brand in mainland
France.
It is anticipated that approximately 3,900 HBCE employees would
transfer with the Business in accordance with relevant
legislation.
HBCE through its subsidiaries HSBC Assurances Vie (France), HSBC
Global Asset Management (France) and HSBC REIM (France) would
continue its existing insurance and asset management activities,
and the Potential Transaction would therefore involve such entities
respectively entering into distribution agreements with the
Purchaser for insurance and asset management products.
The signing of the MOU has been approved by the boards of directors
of HBCE, My Money Group and the Purchaser.
The MOU records the status of the negotiations between the parties
and sets out the information and consultation process between HBCE
and the Purchaser with their respective works councils, which will
commence shortly. It also contains exclusivity commitments entered
into by the parties.
The Potential Transaction would represent a significant step in
HSBC's strategic goal to focus on its strengths and reallocate
capital to invest in areas of growth.
HSBC Europe's strategy (incorporating HSBC Bank plc, our UK
non-ringfenced bank, and Continental Europe operations) is to
connect trade and capital flows between the west and the east,
supporting delivery of our growth ambitions in the Group's
distinctive Asian and Middle Eastern businesses. The potential sale
of our French retail arm and the buyout of the minority shareholder
in our German business completed earlier this year would enable us
to continue to focus on our strengths, consolidate our operating
model, simplify the business, release capital and raise returns.
Our refocused business would enable wholesale clients to access 21
markets and, after excluding the French retail business, generated
more than $7bn of revenues from around $160bn of RWAs in 2020. HSBC
Europe is the largest contributor in the Group of cross-border
client revenues into Asia and the Middle East and is a material
provider of services to clients in the East that wish to access
European capital markets.
Paris would remain the hub for HSBC in Continental Europe, enabling
us to serve multinationals globally with our international network
and to support cross-border banking flows aligned to major trade
and capital corridors. Asset Management and Insurance customers
would also continue to be supported through the respective
businesses which will remain part of HBCE.
Financial terms
The terms of the Potential Transaction contemplate HBCE
transferring the Business to the Purchaser with a net asset value
of c.$2.0bn, subject to adjustment (upwards or downwards) in
certain circumstances, for a consideration of €1
($1.22).
Any required increase to the net asset value of the Business to
achieve the net asset value of $2.0bn would be satisfied by the
inclusion of additional cash within the scope of the Business
transferred. In the event that the net asset value exceeds this
target amount, the consideration would not be adjusted. Under the
proposed terms of the Potential Transaction, HBCE and the Purchaser
have agreed to take certain steps to manage the net asset position
of the Business to be delivered at closing of the Potential
Transaction ('Closing'). This includes HBCE taking steps for HSFH
(or a similar vehicle) to issue covered bonds (up to $2.4bn of
which may be self-financed by HBCE). The net asset position can be
further reduced by up to $1.9bn via arrangements that would result
in related payments due from the Purchaser to HBCE taking place
within three months from Closing. In addition, HBCE would be
entitled to self-finance further secured funding to the Business in
order to manage the net asset position. If the net asset value of
the transferred Business at Closing (calculated on the basis that
certain actions have been taken by HBCE to manage the net asset
position) is expected to exceed the target, HBCE would have the
right to terminate the Potential Transaction (and therefore would
be able to avoid an increased loss on sale).
The Potential Transaction is structured such that the parties may
proceed to Closing even if the relevant conditions to transfer HSFH
and/or the 3% ownership interest in Crédit Logement are not
satisfied. In these circumstances the parties would put in place
arrangements replicating for HBCE the economics that would apply
had the relevant conditions been satisfied. If the parties were to
proceed to Closing without the condition to transfer HSFH being
satisfied, there would be a deferred transfer to the Purchaser of
certain home loans that would otherwise fall within the scope of
the Potential Transaction. Similarly, if the steps the parties have
agreed to take to manage the net asset position of the Business are
implemented where the condition to transfer HSFH is not satisfied,
the amount of home loans that would initially not fall within the
scope of the Potential Transaction may be increased. Any deferred
transfer of home loans would be on the basis of them transferring
at book value, subject to an adjustment such that the Purchaser
should have the economic exposure to the ownership of such loans
from Closing.
The Potential Transaction would involve the transfer to the
Purchaser of HBCE's internal models for calculation of credit RWAs
of the Business based on the internal ratings-based approach. If
the Purchaser obtains regulatory approval to calculate the credit
RWAs of the Business using ratings systems and internal models that
are based on or derived from these HBCE internal models within five
years of Closing, additional consideration will be payable by the
Purchaser to HBCE (to be calculated by reference to the resulting
reduction in capital requirement associated with the Business).
This additional consideration is unlikely to exceed
$60m.
The Board of Directors of HSBC Holdings plc believes the terms of
the Potential Transaction are fair and reasonable and in the
interests of shareholders as a whole. The financial terms and
aggregate contemplated consideration of the Potential Transaction
were arrived at after arm's length negotiations and having taken
into account the value of the component elements of the Business
and the reasons for the sale set out below.
Financial impact of the Potential Transaction
The sale would generate an estimated pre-tax loss (calculated on an
IFRS basis) for HSBC Group of c.$2.3bn, together with an additional
$0.7bn impairment of goodwill[3].
There would be no immediate tax benefit recognised in respect of
the sale loss nor impairment. The vast majority of the estimated
sales loss and impairment is expected to be recognised upon the
classification of the Business as held for sale for accounting
purposes, currently anticipated to be in 2022, with any remaining
elements recognised by completion.
|
Estimate
|
Expected timing of P&L impact
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Estimated
transferring net asset value
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($2.0bn)
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Purchase
price expected to be payable on Closing
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€1
($1.22)
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Estimated resulting pre-tax loss
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($2.0bn)
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2022
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Other
estimated P&L transaction impact (including transaction costs,
write-offs and recycling reserves)
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($0.3bn)
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2021-2023
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Estimated total pre-tax loss on sale for HSBC Group
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($2.3bn)
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Goodwill impairment by HSBC Group
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($0.7bn)
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2022
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Expected financial impacts and timings are based on 31 December
2020 financial position of the Business and the anticipated date of
satisfying the held for sale accounting classification
requirements, both may be subject to change.
It is estimated that the sale of the Business would reduce credit
RWAs at an HSBC consolidated level under UK regulatory rules by up
to $7.1bn based on 31 December 2020 figures. The HSBC Group has a
strong capital position, with a consolidated common equity tier 1
capital ratio of 15.9% as at 31 December 2020. The pre-tax loss on
sale would be partially offset by the reduction in credit RWAs, and
would be expected to lead to an estimated decrease in the HSBC
Group consolidated common equity tier 1 capital ratio of
approximately 15 basis points (based on HSBC Group RWAs at 31
December 2020)[4].
A reduction in the HSBC Group's tangible net asset value
(consisting of the estimated loss excluding intangibles
impairments) of an estimated $2.2bn would be expected upon Closing
(based on the current estimate of the financial impact of the
Potential Transaction). None
of the current unsecured or subordinated debt issued by HBCE will
transfer to the Purchaser as part of the Potential
Transaction.
The financial impact of the Potential Transaction set out above is
calculated on the assumption that HSFH and the 3% ownership
interest in Crédit Logement are within the scope of the
Potential Transaction at Closing. If HSFH does not transfer at
Closing, this would result in an initial lower reduction in RWAs of
HBCE (and of HSBC at a consolidated level).
Given the financial terms of the Potential Transaction, it is not
expected that the Potential Transaction will result in any net
proceeds of sale for the HSBC Group.
On Closing, the profit and loss and the assets and liabilities of
the Business will no longer be consolidated into the HSBC Group's
consolidated financial statements and HSFH, if the required consent
for its transfer is obtained, will cease to be a subsidiary of the
HSBC Group.
HSBC does not anticipate that the Potential Transaction will lead
to a change in the current issuer credit ratings of
HBCE.
Reasons for the Potential Transaction
In the second half of 2019, HSBC commenced a strategic review of
the Business. The strategic review has resulted in the exploration
of the Potential Transaction as HSBC considered that continuing to
operate a relatively subscale retail network in France was not
aligned with its wider global strategy. The implementation of the
Potential Transaction would be an important step towards optimising
HSBC's operating footprint. France remains a key market for HSBC,
and the Potential Transaction would facilitate HSBC's focus on
further developing its wholesale business in Continental
Europe.
Indicative timetable, next steps and conditions
As noted above, the MoU sets out the information and consultation
process by the parties of their respective employees' works
councils and contains exclusivity commitments by both
parties.
The information and consultation processes will commence shortly.
If, following the outcome of these processes, the parties were to
decide to proceed with the Potential Transaction, a governing
transaction agreement would be entered into between HBCE, the
Purchaser and My Money Group setting out the further terms for
implementation of the Potential Transaction.
The Potential Transaction would be subject to clearance from
relevant financial, governmental and regulatory approvals.
Approvals would also be required in connection with the transfer of
the interests in HSFH and Crédit Logement. However as noted
above, the Potential Transaction would proceed even if these
approvals were not obtained.
The Potential Transaction would be expected to close in the first
half of 2023.
Further information
As at 31 December 2020, the value of the gross assets of the
Business was $28.9bn, including $26.2bn of customer loans balance.
The Business also has customer deposit balance of $23.1bn. The
Business under HBCE ownership generated $500m and $495m of
revenues, incurred $705m and $760m of operating costs, and
recognised a $1m net cost of risk reversal and $23m net cost of
risk charge, during the financial years ended 31 December 2019, and
2020, respectively. The loss before tax for the Business for the
financial years ended 31 December 2019 and 31 December 2020 was
$204m and $288m respectively. No loss after tax was recorded for
the Business, as tax is applied at the entity level.
HSBC Global Banking and Lazard are acting as financial advisors to
HSBC in connection with the Potential Transaction.
The Potential Transaction is being treated as a Class 2 transaction
for the purposes of the UK Financial Conduct Authority's Listing
Rules and, in view of a cap on the overall consideration for the
Potential Transaction to be included in the governing transaction
agreement, as a disclosable transaction under the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong
Limited (the 'Hong Kong Listing Rules').
To the best of the knowledge, information and belief of the
Directors of HSBC having made all reasonable enquiries, the
Purchaser and its ultimate beneficial owners are third parties
independent of HSBC and its connected persons (as defined under the
Hong Kong Listing Rules).
Miscellaneous
The Board of Directors of HSBC Holdings plc as at the date of this
announcement comprises: Mark Tucker*, Noel Quinn, James Anthony
Forese† ,
Steven Guggenheimer† ,
Irene Lee† ,
José Antonio Meade Kuribreña† ,
Eileen K Murray† ,
David Nish† ,
Ewen Stevenson, Jackson Tai† and
Pauline van der Meer Mohr† .
* Non-executive Group Chairman
† Independent
non-executive Director
For and on behalf of
HSBC Holdings plc
Aileen Taylor
Group Company Secretary and Chief Governance Officer
Investor enquiries to:
Media enquiries to:
+44 7920 254057
+44 7584 404238
Notes to editors:
1. The abbreviations '$m'
and '$bn' represent millions and billions (thousands of millions)
of US dollars, respectively.
2. HSBC Holdings plc
HSBC Holdings plc, the parent company of the HSBC Group, is
headquartered in London. HSBC serves customers worldwide from
offices in 64 countries and territories in our geographical
regions: Europe, Asia, North America, Latin America, and Middle
East and North Africa. With assets of $2,959bn at 31 March
2021, HSBC is one of the world's largest banking and financial
services organisations.
3. HSBC Continental Europe
HSBC Continental Europe is a subsidiary of HSBC Holdings plc. HSBC
Continental Europe is headquartered in Paris. HSBC Continental
Europe includes, in addition to its banking activities in France,
the activities of 10 European branches (Belgium, Spain, Greece,
Ireland, Italy, Luxembourg, Netherlands, Poland, Czech Republic and
Sweden). HSBC Continental Europe's mission is to serve customers in
continental Europe for their needs worldwide and customers in other
Group countries for their needs in continental Europe.
4. HSBC SFH (France)
HSBC SFH (France) is a funding vehicle used by HBCE for the
issuance of covered bonds backed by mortgage loans issued by
HBCE.
5. Crédit Logement
Crédit Logement operates as a provider of mortgage loan
guarantees in the French market.
6. Banque des Caraibes
Banque des Caraibes ('BdC') is a universal bank regulated by the
ACPR, and is currently operating in the French Caribbean under the
My Money Group umbrella. BdC is ultimately controlled by funds and
accounts managed or advised by Cerberus Capital Management L.P. The
principal business of the Purchaser relates to retail and
commercial banking.
7. Promontoria MMB
Promontoria MMB is a financial holding company of My Money Group
and is regulated by the ACPR. It owns majority shares notably in
Banque des Caraïbes and My Money Bank.
8. My Money Bank
My Money Bank is a bank regulated by the ACPR and is currently
operating in mainland France under the My Money Group umbrella. MMB
is ultimately controlled by funds and accounts managed or advised
by Cerberus Capital Management L.P. The principal business of My
Money Bank relates to debt consolidation and commercial real
estate.
9. Cerberus Capital Management L.P.
Founded in 1992, Cerberus is a global leader in alternative
investing with approximately $55bn in assets across complementary
credit, private equity, and real estate strategies. Cerberus
invests across asset classes, sectors, and geographies where its
integrated investment platforms and proprietary operating
capabilities create an edge to improve performance and drive
long-term value.
10. Lazard & Co., Limited
Lazard & Co., Limited, which is authorised and regulated by the
Financial Conduct Authority in the United Kingdom, and Lazard
Frères SAS (together 'Lazard') are acting exclusively for HSBC
Continental Europe and for no one else in connection with the
Potential Transaction and will not be responsible to anyone other
than HSBC Continental Europe for providing the protections afforded
to their clients or for providing advice in connection with the
Potential Transaction. Neither Lazard nor any of their respective
affiliates owes or accepts any duty, liability or responsibility
whatsoever (whether direct or indirect, whether in contract, in
tort, under statute or otherwise) to any person who is not a client
of Lazard in connection with this document, any statement contained
herein, the Potential Transaction or otherwise.
This announcement contains both historical and forward-looking
statements. All statements other than statements of historical fact
are, or may be deemed to be, forward-looking statements.
Forward-looking statements may be identified by the use of terms
such as 'expects,' 'targets,' 'believes,' 'seeks,' 'estimates,'
'may,' 'intends,' 'plan,' 'will,' 'should,' 'potential,'
'reasonably possible', 'anticipates,' 'project', or 'continue',
variation of these words, the negative thereof or similar
expressions or comparable terminology. HSBC has based the
forward-looking statements on current plans, information, data,
estimates, expectations and projections about, among other things,
results of operations, financial condition, prospects, strategies
and future events, and therefore undue reliance should not be
placed on them. These forward-looking statements are subject to
risks, uncertainties and assumptions about us, as described under
'Cautionary statement regarding forward-looking statements'
contained in the HSBC Holdings plc Annual Report on Form 20-F for
the year ended 31 December 2020, filed with the SEC on 24 February
2021 (the '2020 Form 20-F') and in other reports on Form 6-K
furnished to or filed with the SEC subsequent to the 2020 Form 20-F
('Subsequent Form 6-Ks'). HSBC undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. In light of
these risks, uncertainties and assumptions, the forward-looking
events discussed herein might not occur. Investors are cautioned
not to place undue reliance on any forward-looking statements,
which speak only as of their dates. No representation or warranty
is made as to the achievement or reasonableness of and no reliance
should be placed on such forward-looking statements. Additional
information, including information on factors which may affect the
HSBC Group's business, is contained in the 2020 Form 20-F and
Subsequent Form 6-Ks.
[1] Figures throughout
this announcement were converted from € to $ at 1.22, the
rate at 1 June 2021.
[2] Based on 31 December
2020 HSBC Group consolidated balance sheet and target net assets of
the Business at closing.
[3] Based on 31 December
2020 HSBC Group consolidated balance sheet and target net assets of
the Business at closing.
[4] Estimated HSBC
consolidated common equity tier 1 capital ratio impact calculated
using financial statements dated 31 December 2020 and therefore may
be impacted by circumstances arising between this date and the date
of completion of the Potential Transaction.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
HSBC
Holdings plc
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By:
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Name:
Aileen Taylor
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Title:
Group Company Secretary and Chief Governance Officer
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Date:
18 June 2021
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