Hong Kong: HSBC has agreed to sell its general insurance businesses to AXA Group and QBE Insurance Group for a cash consideration of $914 million, as Europe's biggest bank moves ahead with its plan to divest non-core assets.
The deal, the latest in a series of cost cut initiatives under the new HSBC CEO Stuart Gulliver, includes a 10-year bancassurance agreements with AXA and QBE.
HSBC has cut 11,000 jobs and sold 19 businesses as part of Gulliver's plan to cut annual costs by $3.5 billion. Deals already struck will cut $50 billion in risk-weighted assets.
Shares of HSBC fell 1.5 percent to HKD$67.20 in early trading on the Hong Kong Stock Exchange, slightly more than the 0.7 percent drop in the benchmark Hong Kong share index. QBE shares rose 0.9 percent to A$11.90, bucking a 0.8 percent fall in the benchmark Australian share index.
The businesses being sold are in Hong Kong, Singapore, Argentina and Mexico. AXA will pay $494 million for the assets in Hong Kong, Singapore and Mexico, which had a net asset value of $48 million at the end of 2011, HSBC said in a filing to the Hong Kong bourse.
QBE Insurance Group Ltd will pay $420 million for the assets in Argentina, which had an net asset value of $189 million.
In May, HSBC announced plans to sell non-core businesses, which included shrinking its network of 475 US branches to focus on the international business of US clients and the sale of several European retail banking businesses including those in Poland and Russia.
The deals are subject to regulatory approvals and are expected to close in the second half of 2012, while the deal in Argentina may close earlier, HSBC said. The gross asset value of the businesses being sold was $1.23 billion at the end of 2011, it added.
AXA will rise to No. 1 ranking in Hong Kong and Mexico and to No. 2 ranking in Singapore following the deal, the company said. QBE said it expects its part of the acquisition to add to its earnings in the first full year.
HSBC was advised by HSBC Global Banking and Markets and co-advised on the sale of its Latin American assets by Goldman Sachs .
Citigroup was the sole financial advisor to AXA, a source familiar with the matter said.