PARIS--(BUSINESS WIRE)--Jun 14, 2023--
Regulatory News:
HSBC SFH (France) (Paris:HSBAK):
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
HSBC SFH (France) (‘HSFH’) notes that HSBC Continental Europe (‘HBCE’) has today signed a further Memorandum of Understanding regarding certain potential changes to the terms of the sale of its French retail banking business. The potential changes do not impact the planned sale of HSFH under the terms of the original transaction.
HBCE confirmed today in its regulatory notice that the following potential changes are designed to enable the Purchaser to satisfy its future capital requirements (following significant interest rate rises since the sale was first agreed in 2021) and to obtain regulatory approval for the transaction:
The changes do not alter the underlying rationale for the transaction, which will allow HBCE to focus on its international wholesale business model. There is no immediate change to the IFRS accounting treatment of the HBCE’s French retail business – there will be an information and consultation process with respective works councils and the transaction remains subject to regulatory approvals. The parties are aiming to close the transaction on 1 January 2024.
The financial impact of the transaction for HBCE is now expected to be:
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On 18 June 2021, HBCE announced (the ‘2021 Announcement’) that it had signed a Memorandum of Understanding with Promontoria MMB SAS (‘My Money Group’) and its subsidiary Banque des Caraïbes SA (the ‘Purchaser’, and together with My Money Group, the ‘Purchaser Group’) regarding the potential sale of HBCE’s retail banking business in France (the ‘Business’) (the ‘Transaction’). The parties subsequently entered into a binding framework agreement (‘Framework Agreement’) on 25 November 2021. My Money Group and the Purchaser are under the control, directly or indirectly, of funds and accounts managed or advised by Cerberus Capital Management L.P.
On 14 April 2023, HBCE announced that following significant interest rate rises since the sale terms were agreed in 2021, completion of the Transaction was less certain and that the Business was no longer being classified as held for sale.
HSFH notes that the parties have today signed a further Memorandum of Understanding (‘MoU’) regarding certain potential changes to the terms of the Transaction (the ‘Potential Changes’) which are designed to enable the Purchaser to satisfy its future capital requirements and to obtain regulatory approval for the Transaction. The Potential Changes do not alter the underlying rationale for the Transaction as set out in the 2021 Announcement.
HBCE confirmed today in its regulatory notice that the Potential Changes involve changes to the Transaction perimeter and amendments to certain other agreements as summarised below:
The signing of the MOU has been approved by the boards of directors of HBCE, My Money Group and the Purchaser.
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Financial terms and impact of the Transaction (taking into account the Potential Changes)
The terms of the Transaction announced in 2021 contemplate HBCE transferring the Business to the Purchaser with a net asset value of c.€ 1.65bn on Closing, subject to adjustment in certain circumstances, in exchange for consideration of €1. Taking into account the Potential Changes, the net asset value to be transferred in connection with the Transaction is expected to be substantially unchanged from the terms of the Transaction announced in 2021.
There is no immediate change to the accounting treatment of the French retail business under IFRS – there will be an information and consultation process with respective works councils and the Transaction remains subject to regulatory approvals. Temporary deferred tax liabilities may arise as a result of differences in accounting treatment between IFRS and HBCE accounts prepared on a French GAAP basis.
Taking into account the Potential Changes, the financial impacts of the Transaction on HBCE (on a consolidated basis) are currently expected to be 1:
The table below sets out the expected estimated position, assuming a Swap Rate of 3.0 % and an Origination Rate of 4.0%, in each case at Closing, and a nil initial value ascribed to the profit participation interest. To the extent that the expected Swap Rate and Origination Rate at Closing vary and a value is ascribed to the profit participation interest, the estimated transferring net asset value and therefore pre-tax loss may reduce.
| Estimate as at 31 May 2023 | Expected timing of P&L impact |
Estimated transferring net asset value | €1.8bn | 2H23 |
Purchase price expected to be payable on Closing | €1 | |
Estimated resulting pre-tax loss | ( € 1.8bn) | |
Other estimated P&L transaction impacts (including transaction costs, write-offs and recycling reserves) | (€0.4bn) | 2021-2024 |
Estimated total pre-tax loss on sale for HBCE 3 | ( € 2.2bn) |
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Of which: estimated to be recognised upon reclassification as held for sale | ( € 2.0bn) | 2H23 |
Given the financial terms of the Transaction, it is not expected that the Transaction will result in any net proceeds of sale for HBCE.
Indicative timetable, next steps and conditions
The MoU records the status of the negotiations between the parties in respect of the Potential Changes and sets out the information and consultation process of HBCE and the Purchaser with their respective works councils, which will commence shortly. If, following the outcome of these processes, the parties were to decide to implement the Potential Changes, they would enter into the requisite binding agreements.
The Transaction remains subject to regulatory approvals. The parties are aiming to close the Transaction on 1 January 2024. The long stop date for the Transaction is 31 May 2024, extendable to 29 November 2024 in certain circumstances.
Notes to Editors
HSBC SFH (France)
HSBC SFH (France) is a funding vehicle used by HSBC Continental Europe for the issuance of covered bonds backed by mortgage loans issued by HSBC Continental Europe.
HSBC Continental Europe
Headquartered in Paris, HSBC Continental Europe is an indirectly held subsidiary of HSBC Holdings plc. HSBC Continental Europe includes, in addition to its banking, insurance and asset management activities based in France, the business activities of 10 European branches (Belgium, Czech Republic, Greece, Ireland, Italy, Luxembourg, Netherlands, Poland, Spain and Sweden) and two subsidiaries (Germany and Malta) acquired in November 2022. HSBC Continental Europe’s mission is to serve both customers in Continental Europe for their needs worldwide and customers in other Group countries for their needs in Continental Europe.
HSBC Holdings plc
HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. HSBC serves customers worldwide from offices in 62 countries and territories in its geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. With assets of US$2,967bn at 31 December 2022, HSBC is one of the world’s largest banking and financial services organisations.
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. HSFH 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 theHBCE group, as described under 'Cautionary statement regarding forward-looking statements' contained in the HBCE Annual Report for the year ended 31 December 2022. HSFH 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.
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1 Based on 31 March 2023 HBCE consolidated balance sheet and capital position.
2 Estimated based on the 31 March 2023 position of the business.
3 Inclusive of transferring business net asset value and profit participation interest at nil fair value.
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CONTACT: Investor enquiries to:
Richard O'Connor + 44 (0) 20 7991 6590investorrelations@hsbc.com
Media enquiries to:
Heidi Ashley + 44 7920 254057heidi.ashley@hsbc.com
Sophie Ricord + 33 6 89 10 17 62sophie.ricord@hsbc.fr
Raphaële-Marie Hirsch + 33 7 64 57 35 55raphaele.marie.hirsch@hsbc.fr
KEYWORD: FRANCE EUROPE
INDUSTRY KEYWORD: BANKING PROFESSIONAL SERVICES FINANCE
SOURCE: HSBC SFH (France)
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PUB: 06/14/2023 10:40 AM/DISC: 06/14/2023 10:38 AM
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