HSBC Continental Europe, an indirectly held subsidiary of HSBC Holdings plc (“HSBC Group”), today signed a memorandum of understanding with a consortium comprising Rothesay Life plc and CCF regarding the sale of its French portfolio of predominantly home and certain other retail loans retained after the disposal of its retail banking business in France.
At 31 December 2024, the Portfolio had an outstanding balance of €6.7bn.
On 1 January 2025, the Portfolio was reclassified from hold-to-collect to hold-to-collect-and-sell, and during the first quarter of 2025, the HSBC Group recognised a €1.2bn ($1.3bn2) pre-tax fair value loss through other comprehensive income on the Portfolio, and a €0.1bn ($0.1bn2) fair value gain in the income statement on related interest rate hedges. The fair value loss on the Portfolio resulted in an approximately 0.2 percentage point reduction in the HSBC Group CET1 ratio, which stood at 14.7% at 31 March 20253.
At completion of the Potential Transaction:
- The loss recognised in other comprehensive income will be recycled to the income statement with no further impact on HSBC Group’s CET1 ratio.
- The risk weighted assets (“RWAs”) of the Portfolio4 will be deconsolidated, resulting in an immaterial benefit on the HSBC Group CET1 ratio.
The Potential Transaction is expected to complete in the fourth quarter of 2025, subject to the appropriate information and consultation processes with respective works councils. HSBC Continental Europe will work closely with the Consortium Buyer to enable a smooth transition.
Financial impact of the transaction on HSBC Continental Europe:
- Since the reclassification of the Portfolio on 1 January 2025 from hold-to-collect to hold-to-collect-and-sell, HSBC Continental Europe recognised during the first quarter of 2025, a €1.2bn fair value pre-tax loss through other comprehensive income and a €0.1bn fair value gain in the income statement on related interest rate hedges. The fair value loss on the Portfolio resulted in an approximately 2 percentage points reduction in HSBC Continental Europe’s CET1 ratio, which stood at 18.8% at 31 December 20245.
- At completion of the Potential Transaction, the loss recognised in other comprehensive income will be recycled to the income statement with no further impact on HSBC Continental Europe’s CET1 ratio. The RWAs6 of the Portfolio will be deconsolidated and it is estimated that the HSBC Continental Europe CET1 ratio will increase by approximately 0.3 percentage point.
