Banco Bradesco SA agreed to acquire HSBC Holdings Plc's money-losing Brazil unit for $5.2 billion in cash, more than some analysts had estimated, after it outbid at least two competitors.
With the purchase, Bradesco's assets will increase by about 16 percent to 1.19 trillion reais ($348 billion), the Osasco, Brazil-based lender said in a statement Monday. Itau Unibanco Holding SA and Banco Santander Brasil SA had also offered to buy the HSBC business.
HSBC put the unit up for sale after it lost 549.1 million reais last year and the London-based bank embarked on a plan to cut annual costs by as much as $5 billion. Bradesco will add about 850 branches with the purchase, which was set to fetch about $4 billion, people with knowledge of the deal said in May.
The deal will expand the lender's geographic reach in Brazil and help it expand in insurance, credit cards and asset management, the company said.
The transaction requires regulatory approval. Bradesco said its common equity Tier 1 capital ratio, a measure of financial strength, will drop 2.8 percentage points to 10 percent with the acquisition.
The purchase price, which values the unit at about 1.8 times it tangible book value, is "much higher than market expectation," Bernstein analysts led by Chirantan Barua wrote in a note Monday.
HSBC, which has operated in Brazil since 1997, has about 20,000 employees in the country and is the nation's sixth- largest retail bank.
Bradesco was advised by its investment banking unit, JPMorgan Chase & Co. and Rothschild.