HSBC Holdings plc’s HSBC plan to divest its unprofitable Turkish operation has hit a roadblock. According to a Bloomberg report, the Netherlands-based ING Groep NV ING, which was supposed to ink a deal to acquire the unit, has backed off.
HSBC had put the Turkish unit on the block in Jun 2015, as part of its restructuring plans. Since then, the sale process has been facing unprecedented delays.
In Sept 2015, Bloomberg reported that HSBC will likely face a delay in selling its Turkish business to ING Groep, owing to political chaos in Turkey and the global market turmoil. As a result of this holdup, the company approached other banks including Garanti Bank, Fiba Holding and Yapi Kredi for vending the unit.
One of the primary reasons for which the proposed deal with ING Groep has been called off is the deteriorating condition of Turkish economy. Also, uncertainty over matters related to Demirbank, which was seized by the government in 2001 and then sold to HSBC at a massive discount, led ING Groep to reconsider its decision.
Further, the recent news that National Bank of Greece S.A. is divesting its Turkish unit – Finansbank – has made matters worse for HSBC. With a profit of 169.1 million liras ($57 million) in the third quarter of 2015 as per filings, Finansbank is a far more lucrative option for ING Groep.
We believe the delay may not be an issue for HSBC at present, but continued postponement or any unfruitful decision could lead to failure of its targeted restructuring plan. Now, the company will have to spend further time and efforts to reach an agreement with other potential buyers.
Further, there are chances that the company might fail to secure a favorable value for the distressed unit owing to increasing complexities and headwinds surrounding the same.
Currently, HSBC carries a Zacks Rank #3 (Hold). Some foreign banks worth a look include Banco Macro S.A. BMA and Mizuho Financial Group, Inc. MFG. Both these stocks hold a Zacks Rank #2 (Buy).
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