HSBC Hires Goldman To Find Brazil Unit Buyer

HSBC has kicked off a multibillion pound sale of its Brazilian operations as the bank's leadership seeks to address concerns about a string of underperforming business units.

Sky News has learnt that HSBC has appointed Goldman Sachs (NYSE: GS-PB - news) , the Wall Street investment bank, to handle an auction of the bulk of its operations in Brazil, with analysts estimating that they could command a valuation of several billion pounds.

A separate effort to sell its Turkish business is being handled by HSBC's own investment bankers, insiders said.

Details of the planned disposal processes have emerged just days after HSBC told shareholders that it had begun a review of the location of its headquarters amid investor pressure to seek a more cost-effective global base.

City sources said that Goldman had in recent days begun contacting prospective buyers, expected to include dominant players in the country's banking industry such as Banco Bradesco, Banco do Brasil and Itaú-Unibanco.

The operations that HSBC is looking to offload in Brazil are said to encompass its entire business in the country with the exception of some investment banking functions which serve major corporate clients.

The unit has suffered from a deterioration in profitability, driven partly by a rise in impairments, while it has only a 3% share of Brazil's banking market.

Speaking at its annual results in February, Stuart Gulliver, HSBC's chief executive, described Brazil and Turkey as two of the bank's four biggest problem markets.

"So we absolutely need to turn them round, or we would need to think of more extreme solutions to the problem... And there are no options in terms of that restructuring that we would not consider," he said.

HSBC's other two national operations in the problem quartet, Mexico and the US, are not being earmarked for sale processes, analysts believe.

The acceleration of the Brazilian and Turkish auctions comes amid a more far-reaching examination of changes to HSBC's structure.

A committee of executives, led by Mr Gulliver, will report to HSBC Holdings (Xetra: HBC2.DE - news) ' board on the headquarters review later this year.

The bank is a substantial payer of corporation tax in the UK, but its board has become increasingly concerned that industry-specific taxes and the future shape of regulation are making it uneconomic to remain based here.

The bank, which has been under pressure from regulators and politicians over the Swiss tax evasion scandal which re-emerged in February, will face significant obstacles if it does decide to move its headquarters to Hong Kong.

HSBC has been headquartered in the UK since 1992, when it acquired the Midland Bank.

It now employs more than 47,000 people in the UK, 1,000 of whom are to move to Birmingham as part of a recently announced relocation of its UK bank head office.

Prior to the banking crisis, HSBC undertook a review of its domicile every three years, but has not done so since 2010 because of the shifting regulatory landscape.

Under UK Government reforms, universal banks such as HSBC and Barclays (LSE: BARC.L - news) will have to erect a firewall between their high street and investment banking operations by 2019 in order to insulate taxpayers and customers in the event of a future financial crisis.

Chancellor George Osborne recently said that the Bank Levy, introduced in 2010, was now regarded as a permanent fixture of the tax system, while Labour has pledged to raise an additional £800m-a-year from the Levy to fund its childcare plans.

HSBC executives are also concerned that the ring-fencing structure will diminish its ability to exert influence over its UK bank.

An HSBC spokesman declined to comment on the appointment of Goldman Sachs.