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Banco Bradesco Purchases HSBC’s Business in Brazil

Banco BradescoSeveral years of poor financial results has forced HSBC, the largest bank in Europe, to sell the Brazil part of its business to Banco Bradesco SA.

The bank, which entered Brazil in the nineties, found it impossible to compete with Banco do Brasil, Bradesco, and Itau, the biggest banks in the country. HSBC’s assets in Brazil are worth around $50 billion. The bank employs 21,000 residents and has 854 branches all over the country.

While formally announcing the sale of its business in Brazil, Stuart Gulliver, the chief executive officer of HSBC, said:

I am pleased to be able to announce today a transaction which achieves both a solid financial outcome and swift delivery of one of our stated actions.

The purchase enables Bradesco to compete effectively with rivals Caixa Economica Federal, Banco do Brasil, and Itau. Bradesco told Reuters:

The acquisition will create scale gains and the optimal use of business platforms, leading to bigger nationwide coverage … and reinforcing the bank’s presence in the high-end income segment.

The sale has reduced HSBC’s assets by $37 billion. The bank’s strategy of increasing profits by reducing assets appears to have worked. During the first two quarters of the fiscal year, the bank reported 10% increase to $13.6 billion in its profit before taxes. In another recent report, the bank said that its revenue has shot up to $32.9 billion from $31.1 billion. The major contributing factor to the bank’s profits is its excellent performance in Asia.

HSBC analyst Chirantan Barua told The Financial Times:

The star in the quarter was equities which saw its best performance ever, up 32% quarter-on-quarter and 155 per cent year-on-year—this must have been off the volatility in Asia.

This year, HSBC made headlines for the wrong reasons. According to a report published by the International Consortium of Investigative Journalists, 100,000 people are using the bank’s services to dodge taxes. In addition, several countries are investigating HSBC’s alleged role in foreign exchange manipulation.

This June, HSBC announcing that it will shut down its branches in Brazil and Turkey and cut down 50,000 jobs.

HSBC has 266,000 employees in 73 countries all over the globe. The bank plans to focus on markets in Asia, and as part of these plans, it intends to shift its headquarters to Hong Kong, where it is reaping huge profits. However, the bank will make its final decision regarding this only at the end of 2015.