HSBC to sell assets in South America for $400 million

As I was running down some facts presented in this thread that is about an HSBC whistleblower bringing to light ‘ghost accounts’ that appear to be nothing more than tools to launder dirty money, I stumbled across something that has had me flummoxed ever since I read it last night. Literally, it had me completely stumped.

In a Reuters article that I found in my research of the above mentioned thread topic, it states:

HSBC has 62 branches in the four Latin American countries it is leaving - 24 in Peru, 20 in Colombia, 11 in Uruguay and seven in Paraguay - out of more than 3,000 across the Americas.

As of December 2011, the four operations for sale had assets worth $4.4 billion, HSBC said.

Compare that to what HSBC has agreed to sell it for:

HSBC Holdings PLC (HSBA.L) said on Friday that it had agreed to sell its operations in Colombia, Uruguay, Peru and Paraguay for $400 million in cash to Banco GNB Sudameris.

Reuters Sourced Article: "HSBC to Sell Assets in South America for $400 Million"

Did you catch that? Worth $4.4B…. selling for $400M. This is what totally had me stumped, to the point where I just could not get my head around it. On the surface it looks like the deal of the century or a trunk sale at Filene’s Bargain Basement.

The concept that one of the world’s largest banks would be willing to take such a loss was beyond my limited comprehension…until Maxmars lifted me up beyond the tree line so I could see the rest of the forest. (Thank you very much Maxmars!)

What we see here is fractional reserve banking at its finest in my opinion. I don’t pretend to know all the ins and outs of just how fractional reserve banking works, but I would assume that the $400M agreed price would be the amount that would cover the actual physical fluid cash that HSBC has in these 62 banks. Ok, if that is the case, I can understand that at least. But, if you were sitting on $4.4B in assets, would you be willing to only take $400M in exchange for that? I would think that they would want a little more profit out of the deal. But that’s just me. Could it be that HSBC has suddenly grown a heart a la Grinch style? No, I think not. Even I cannot live and play in that fantasy land.

Taking the basic principles of re-investment activity in the practice of Fractional Reserve Banking, let’s play devil’s advocate here for a minute and sneak a peek behind the curtain to what I see as a possibility of what is happening here. Consider these points:

- The financial firm that HSBC has agreed to sell these 62 branches to is a family owned outfit that has been in operation for many many years in Columbia.

- Columbia is not exactly known as a country that deals harshly with its drug cartels. *wink wink*

- Drug cartels bring in big money

- Fractional Reserve Banking allows for banks to invest in other banks, boosting the 2nd bank’s ability to invest more, thereby increasing their profit as well as increasing the profit margin for the investing bank.

- Banco GNB Sudameris, the purchasers of the HSBC branches in the 4 Latin American countries mentioned, being in located Columbia, I’m sure has more than their fair share of drug cartel accounts on their books. (I don’t think that is a farfetched statement, even for no proof in the form of a link)

- HSBC and Banco GBN Sudameris enter talks outlining the deal. HSBC agrees to sell for the $400M in liquid cash they have in those banks (if that is the case) in exchange for being able to dump investments back into Banco GNB Sudameris through HSBC’s own ghost accounts still reaping the benefit in interest paid on drug cartel money.

- HSBC’s own drug cartel accounts in these 4 Latin American branches then become property of Banco GNB, because come on let’s face it, it’s plain naïve to think HSBC does not have their fair share of drug cartel laundering accounts in these countries as well.

- This frees HSBC from any responsibility should these accounts come under scrutiny and investigated for laundering dirty money.

- This also puts all the responsibility on Banco GNB who I am sure knows just who to pay off should these accounts be exposed. It’s their backyard so to speak, I’m sure they have ‘connections’ to make it all go away.

- Since what I see as the very real possibility that HSBC would then turn around and dump investment money back into Banco GNB by way of ghost accounts, I’m sure it will be no time at all before the difference between the $400M sale price and the $4.4B actual value will be realized and if HSBC plays their cards right, not only will the difference be realized, mega profits would soon follow. Not a bad haul for doing virtually nothing at all to get those profits, huh?

I could be totally off the mark here and I probably am. It’s just an interesting mental exercise in the ongoing nonsense our banks are engaged in these days.

So, because I know there are far more intelligent financially minded here on ATS, far and above my own knowlwdge in this area, what is your take on all of this? Your comments, ideas and thoughts are greatly appreciated.

~MMIMO

Additional source for information on this topic and the movements HSBC is making or attempting to make around the world:
NewsNow.co.uk - HSBC Articles

I wonder if HSBC holds a significant amount of mortgages or deeds. I believe that could potentially account for some of the discrepancy between assets and the significantly lower sale price.

It appears to me that HSBC is doing some dirty dealing behind the scenes. I found this article about the selling of their credit card business to Cap one and the purchase of Western New York branches by First Niagara Bank. First Niagara will then close some offices and sell some to Key Corp. Leaving them with about 94 branches.ChicagoTtribune

The article says that they are undergoing a global restructuring. With the link from the previous thread stating they are being investigated by a congressional comittee I think that there's more than meets the eye about their "global restructuring". If they are selling the parts of the business where the ghost accounts are. They may be divesting themselves of the liability for those accounts and may be able to still control those accounts behind the scenes, while transferring the liability for them to the purchaser.

reply to post by Kali74


Check the link in my post. It explains what happened to the credit card business. Also the mortgage business.

I wonder how many people "escaped" America's fall there as I have heard so much about?That would be the connection.

Originally posted by Kali74
I wonder if HSBC holds a significant amount of mortgages or deeds. I believe that could potentially account for some of the discrepancy between assets and the significantly lower sale price.

Could very well be. That is an angle I had not considered until now in any detail. From what I have been able to understand here, HSBC is on a global rampage to dump their 'toxic' investments and businesses in an attempt to make them more "healthy" in a very unhealthy global economy.

Since you have brought this angle up, what I see here as a possibility of a mini, very localized burst of the housing bubble that the US experienced in 2008.

Now, having said that it is interesting to note that over the last year, since the new CEO Stuart Gulliver came into power at HSBC, they have managed to cut approximately $60B off their bottom line by pulling out of upstate NY, Russia, Poland, Chile and some others. Now the 4 countries in South America. Also, they're now in talks with Canada, India and others to sell HSBC's assets in those countries as well. Interesting, huh?

In a Wall Street Journal source I had last night that has now become a "Pay if you wanna see it again" deal so I could not use it for this thread.. it out right said that HSBC is turning to its Asian market assets because of the increase of wealth in those countries and dumping assests across the globe. The implication being that the rest of the world in HSBC's mind has become the 99% and Asia the 1% with whom they would now prefer to do business with.

What a world!! Thanks for replying!

reply to post by cavtrooper7


Could you elaborate a bit.

I'm not sure I understand what you are saying.