HSBC is selling its Argentinian business to Buenos Aires-based private financial firm Group Financiero Galicia in a $550 million deal.

The bank said that the move would result in pre-tax losses of $1 billion in the first quarter of 2021.

The loss follows an 80 per cent profit decline in the previous quarter driven by an impairment charge linked to its stake in China's Bank of Communications.

HSBC will also have to recognise $4.9 billion in historical losses relating to the value of the Argentinian peso dropping at closing of the buyout.

HSBC chief executive Noel Quinn said on Tuesday that the sale, which is expected to close over the next 12 months, will enable the bank to focus its resources on "higher value" opportunities across its international footprint.

“HSBC Argentina is largely a domestically focused business, with limited connectivity to the rest of our international network," continued Quinn. "Furthermore, given its size, it also generates substantial earnings volatility for the Group when its results are translated into US dollars."

The chief executive went on to say that HSBC "remains committed" to its businesses in Mexico and the US.

Rob Murphy, managing director, financials and investment trusts at investment research consultancy Edison Group told FStech that the deal signifies a departure from where HSBC has struggled to meet expectations, notably in Argentina, where hyperinflation and currency devaluation of the peso have posed significant challenges.

Speaking about the bank's loss following the sale, he said: "While the anticipated losses may present a short-term setback, the move under-scores the bank's commitment to enhancing long-term shareholder value through operational simplification. By shedding underperforming assets and refocusing efforts on core markets, HSBC aims to fortify its position and streamline its operations for sustained growth.”

HSBC's announcement comes after the bank sold its French retail banking unit earlier this year, as well as its business in Canada.

The Kremlin also recently gave HSBC permission to offload its business in Russia more than a year after the UK bank announced a deal.

In June 2022, HSBC said that it had agreed to sell a 100 per cent stake in its HSBC Bank (RR) unit to Expobank in light of Russia’s illegal invasion of neighbouring Ukraine and subsequent Western boycott of Russia.

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