HSBC takes $1bn hit from sale of Argentinian business

BANKING giant HSBC is set to take a billion-dollar loss after agreeing to sell its Argentinian business which has been plagued by an unstable exchange rate in recent years.

The bank said it is selling HSBC Argentina, which has more than 100 branches and around 3,100 employees, to Grupo Financiero Galicia, a major private financial group in the South American country.

It comes after years of struggles with the highly volatile Argentinian currency.

Around five years ago £1 would buy 56 pesos. On Tuesday £1 was worth nearly 1,100 pesos.

HSBC said the sale, for $550m (£435m), will see it book a one-billion dollar (£791m) loss in its first-quarter results this year.

The size of the loss could vary for several reasons, including “associated hyperinflation and foreign currency translation”, HSBC said on Tuesday.

Over the next 12 months the business will also recognise $4.9bn (£3.9bn) in losses from historical currency translation reserves.

This refers to the loss that is racked up by translating the financial performance of the Argentinian business, which is counted in pesos, on to HSBC’s overall balance sheet, which is counted in US dollars.

“These reserve losses have accumulated over many years and arise from the cumulative translation of the Argentinian peso-denominated book value of HSBC Argentina into US dollars,” HSBC said.

In 2023 alone these losses grew by $1.8bn (£1.4bn), the bank added.

The figure is also likely to change between now and when the sale is completed because the exchange rate will keep changing.