HSBC France’s bad sale is better than nothing
LONDON, June 18 (Reuters Breakingviews) – Cleaning can be expensive. This is the lesson of HSBC (HSBA.L), (0005.HK) the possible sale by the Managing Director Noel Quinn of its French distribution network to a company backed by Cerberus Capital Management read more. It will shift the loss-making activity to a tangible book value of $ 2 billion, with HSBC filling any gaps in the balance sheet once the deal is done. If you add in other transaction expenses, the transaction will cost HSBC around $ 2.3 billion in total, down 15 basis points from its Tier 1 capital ratio of 15.9%.
Quinn could have avoided the blow by turning the affair around him. But the layoffs and ensuing union battles would consume management’s time and bandwidth. Better to look at the $ 2.3 billion as the cost of a sharper European focus. Other mainland businesses will target wholesale customers rather than consumers. Quinn can begin to integrate the region’s IT systems and reduce shared costs. In this case, a bad deal is better than nothing. (By proud Liam)
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