Lloyds TSB, the high street bank trying to kick-start a new run of profit growth, finally managed yesterday to offload the majority of its Brazilian banking operations for £490m to HSBC as part of its plan to focus on core areas such as lending and savings in the UK.
The deal wipes £1.3bn from Lloyds' exposure to Latin America, leaving it with exposure to the troubled region of just £200m.
HSBC, which has, along with most major banks, been burned by losses in Latin America, has swallowed the business as part of its drive to expand its consumer finance business in emerging economies in various parts of the world, including Latin America and also countries such as China and India.
The world's second-biggest bank after Citigroup will buy the Losango Promotora de Vendas consumer lending business and the Brazilian treasury operations of Lloyds. It will also buy Lloyds' Brazilian corporate and offshore loan books, which it will merge with its existing wholesale banking operation.
HSBC bought the giant American consumer finance business, Household International, for $14.8bn (£8.9 bn) in March and has made it clear it sees the loans sector as one of its key planks for future growth. Many people in developing economies need banks to provide loans for basic functions such as buying a car or for furniture for their homes more than they need credit cards or savings accounts.
HSBC believes this means that expanding in this area in countries such as Brazil could be very lucrative because initiating a lending relationship with a customer could in time lead to them buying many more products from the bank as they become more wealthy.
HSBC plans to use Household's technology - which uses sophisticated techniques to assess credit risks - throughout its group, including in its new Brazilian arm. It already has 1,500 banking outlets in Brazil. The acquisition triples its customer numbers in the country to 10.5 million.
Eric Daniels, who took over as chief executive of Lloyds in May, has made it clear he wants to offload parts of the bank's empire which he does not believe will deliver top-notch growth.
However, the bank had some good news for the City this week when it said it was not relying on disposals to bolster its capital reserves. The bank also relieved investors earlier this year when it did not cut its dividend.Reuse content