Brazil’s antitrust watchdog Cade is due to reveal on Wednesday whether HSBC Holdings Plc can sell its Brazilian unit to Banco Bradesco SA, a decision with big implications for the British bank’s Chief Executive Officer Stuart Gulliver and shareholders.
Gulliver is counting on the $5.2 billion sale of HSBC Bank Brasil Banco Múltiplo SA to boost HSBC’s main capital ratio and ensure the bank remains the biggest dividend payer among European banks. Some analysts fear the bank may fail to maintain its payout if the unit’s sale is delayed.
“This deal is important because it adds 60 basis points to HSBC’s capital strength which gets them to their target and means they can maintain the dividend in a weak year for earnings,” said Ian Gordon, an analyst at Investec.
Brazil’s central bank has already approved the deal, HSBC’s biggest single asset sale since pledging to shrink its sprawling global business to cut costs and boost profits.
Yet, watchdog Cade has clashed with the central bank in the past over their roles in supervising M&A in banking. Both said they have jurisdiction over the financial sector based on their interpretation of the law. The issue is currently being analyzed by Brazil’s Supreme Federal Court.
Cade has been reviewing Bradesco’s purchase since February and has so far failed to reach a consensus among its directors that competition will not be affected, a source familiar with the discussions told Reuters. The watchdog’s scrutiny of the deal is taking place as Brazil wrestles with the impact of a harsh recession and a sweeping political crisis.
Full Content: Reuters