Davivienda aims to recover US$801mn investment in HSBC purchase in 7 years

Tuesday, January 24, 2012

Colombian bank Banco Davivienda expects to recover the US$801mn it paid for HSBC's (NYSE: HBC) banking operations in Costa Rica, El Salvador and Honduras in seven years by improving the acquired businesses' profitability, bank chairman Efraín Forero told BNamericas.

The three units currently have "moderate" combined ROEs of some 10%. Davivienda aims to lift this figure to around 15% over the next few years by improving efficiency, implementing best practices and increasing each of these banks' focus on the retail and corporate segments, Forero said.

The deal will be paid for in cash and increase the size of the bank's assets by 25%, he said.

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The businesses being sold comprise 136 branches across the three countries, and as of September 30 they held some US$4.3bn in assets and US$2.5bn in loans.

The transaction includes two insurers in El Salvador and Honduras, which have combined premiums of some US$40mn, Forero said.

The move marks another step in HSBC's retreat from non-core markets in Latin America and other regions, part of its plan to cut costs by as much as US$3.5bn.

Last year, it sold its Chilean retail banking unit to Brazil's Itaú Unibanco (NYSE: ITUB).

"The transaction demonstrates our commitment to driving growth and improving returns in Latin America by divesting businesses that do not meet our investment criteria," Antonio Losada, chief executive designate of HSBC's Latin American business, said in a press release issued Tuesday.

The deal is expected to complete in the fourth quarter of this year.

Davivienda is owned by Colombia's Grupo Bolívar and is the country's third largest bank.