HSBC has agreed to buy part of Lloyds’ banking business in the United Arab Emirates, after months of selling off its own assets to cut costs.

HSBC has agreed to buy part of Lloyds’ banking business in the United Arab Emirates, after months of selling off its own assets to cut costs.

HSBC’s Middle East subsidiary agreed to purchase the onshore UAE retail and commercial banking division of UK rival Lloyds, which was last valued at around $769 million at the end of last December, it said in a statement.

The business being acquired from Lloyds has approximately 8,800 personal and commercial customers, and a loan book of approximately $573 million as at 31 December 2011. The transaction is subject to regulatory approvals and is expected to complete in the third quarter of 2012. 

"HSBC is the leading international bank in the UAE and the addition of Lloyds' strong presence in retail and commercial banking is highly complementary to our business," Simon Cooper, HSBC's deputy chairman and chief executive for the Middle Eastern and North Africa region, said in a statement. “The acquisition underscores the strategic importance of the UAE, and of the MENA region as a whole, to HSBC,” he added.

Solid UAE footprint

HSBC’s largest operations in MENA are based in the UAE, where it has a trade and commercial banking presence, as well as the largest international retail banking and wealth management business.

The global bank has a strong presence in the region, which is why it is building up here, whilst retreating from regions where it lacks scale.

HSBC is the most widely represented foreign bank in the Middle East and North Africa with a presence in 14 countries including the UAE, Egypt, Qatar, Oman, Bahrain, Kuwait, Jordan, Lebanon, Pakistan, Algeria and the Palestinian Autonomous Area.

In Saudi Arabia, HSBC is a 40 per cent shareholder of Saudi British Bank, and owns a majority shareholding in Dar Es Salaam Investment Bank in Iraq. HSBC also has a representative office in Libya.

This presence, the widest reach of any bank in the region, comprises some 273 offices and around 12,000 employees. In the full year 2011, HSBC in the MENA region made a profit before tax of $1.4 billion.

Cutting back

Meanwhile, the bank is beating a retreat from areas where it does not have a strong presence, as part of its strategy to focus its capital and resources on the growth of its core businesses. Last week it said it was in talks to sell its wealth management and retail banking business in Mauritius. It also signed a deal to sell 80 per cent of its Middle East private equity business to Havenvest Partners.

Earlier this month, HSBC agreed to offload its general insurance manufacturing portfolios in Hong Kong, Singapore, Argentina and Mexico to AXA and QBE in separate deals valued at $914 million. It has also sold businesses in Japan, Thailand and South Korea.

The bank’s wide-reaching cost-cutting programme and global restructuring will impact around 30,000 jobs, as chief executive Stuart Gulliver attempts to rein in costs in a difficult trading environment.

HSBC is not alone in making cutbacks. Lloyds, which is 40 per cent owned by the UK government after a state bailout during the 2008 credit crisis, is undergoing a restructuring plan to halve its international presence and cut 15,000 jobs.