- Written by Ione Wells and Robert Plummer
- BBC News, São Paulo and London
Banking giant HSBC has been forced to sell its Argentina operations at a loss of $1bn (£790m) after years of battling the country's volatile exchange rate.
HSBC Argentina, which has more than 100 branches and 3,100 employees, will be acquired by Grupo Financiero Galicia, a large private financial group.
Argentina's annual inflation rate reached 276.2% last month, the highest in the world.
Five years ago, $1 could buy 43 pesos. Today it is worth more than 860 pesos.
HSBC has been in Argentina since 1997, when it took full control of local Banco Roberts and changed its name. That same year, the company took over the ailing Bamelindos Bank and established itself in neighboring Brazil, leading some observers to speak of the company's “relentless march into Latin America.”
HSBC still operates in Brazil, but sold its retail banking business in Brazil in 2015, purely as an investment bank.
Other businesses around the world have also been sold in recent years as the London-based bank pivots to focus more on fast-growing Asian markets.
HSBC announced that it will post a $1 billion loss in the first quarter of this year after selling its Argentina business for $550 million.
HSBC said on Tuesday that the size of the loss could fluctuate for a number of reasons, including “currency fluctuations associated with hyperinflation.”
Over the next 12 months, we expect to recognize a loss of $4.9 billion from our historical currency translation reserves.
This refers to the losses accumulated by translating the financial performance of the Argentine operations, which are calculated in pesos, to HSBC's overall balance sheet, which is calculated in US dollars.
HSBC said: “These reserve losses have accumulated over many years and result from the cumulative translation of HSBC Argentina's Argentine peso book value into US dollars.”
In 2023 alone, these losses increased by $1.8 billion, the bank added.
Because exchange rates are constantly changing, your exact loss may change between now and the time the sale is completed.
HSBC CEO Noel Quinn said: “We are delighted to have reached an agreement to sell HSBC Argentina.
“This transaction is another important step in the execution of our strategy, allowing us to focus our resources on higher value opportunities across our international network.
“HSBC Argentina is a primarily domestically focused business with limited connections to other international networks.
“Furthermore, given its size, there will be significant fluctuations in the group's revenues when the results are translated into US dollars. Galicia is well-positioned to invest in and grow the business.”