Upon logging into their computers on February 1, 2013, employees of HSBC Bank, Panama, were met with the official statement that in a few months the bank will have a new owner: Bancolombia. The buyer will pay two thousand 100 million for 100% of the capital stock of the English bank, being the largest transaction in the banking sector ever made locally.
The main challenge for the Colombian entity will be to keep the portfolio of 420,000 customers it will inherit with the purchase of HSBC Panama. Included in the purchase are the subsidiaries that had the English capital bank in Panama, HSBC Securities, and the finance company Financomer S.A.
The news was no surprise to the employees, as it was part of office gossip and comments from bank clients, although senior management had been tight lipped about the issue to avoid leaking sensitive information that could affect the negotiations.
This transaction is the second largest move made by HSBC on the Panamanian market in less than six years, as in 2006 it acquired Banistmo operation for a total of a thousand 770 million dollars making it one of the largest banks in assets, number of branches, number of employees and portfolio of deposits and loans.
Details of the Agreement
The announced purchase includes 100% of the ordinary shares and 90.1% of the preferred shares HSBC has in Panama including all financial transactions in the country,taking place through the bank and its subsidiaries: Financomer SA, HSBC Seguros Panama SA, and HSBC Securities, S.A.. In other words, one of the smallest banks operating with a single branch in our local market will absorb the larger bank.
With this purchase, Bancolombia will operate a bank with 420,000 customers and worth 11 thousand 600 million dollars in assets. Probably the immediate challenge for the future of Bancolombia will be prevention measures to keep their clients from fleeing to other institutions. An executive of HSBC said that the international client base will be the first that could migrate to another bank.
Regarding the transaction, what remains is for the regulatory authorities in Panama and Colombia to give the go ahead for the operation.
Alberto Diamond, Panama’s banking Superintendent said that “we as regulators have been aware of the negotiations between the HSBC bank Panama and Bancolombia, however, to complete the transaction the parties need the approval of the Superintendent of Banks of Colombia and Panama as the sector regulators.”
Diamond explained that the processing of the entire transaction in both superintendents may take several months, but said that in the case of Panama it will be analyzed as soon as possible, because Bancolombia is an entity that already operates in the Panamanian market. For Bancolombia this acquisition is an opportunity to continue the development of its “internationalization strategy.”
“With this transaction we reiterate that we believe in Panama. The American financial sector has evolved significantly in recent years, particularly in Panama, and we see that it is possible to continue to participate and contribute from our business model and our knowledge of the market, “said Carlos Raul Yepes, president of Bancolombia.
“Panama is one of the largest and most sophisticated financial systems in the region, characterized by its strength and profitability. We are proud of the progress we have made which allowed us to follow and be part of the growth of Panama, ” said Yepes.
He also indicated that Bancolombia has been preparing for some time for a transaction of this nature and has the capital and liquidity necessary to carry it out. “Maintaining solvency levels required by financial regulators will enable us to have the capital in cash to complete the transaction without issuing shares,” specified the Colombian banker.
The purchase is a sweeping move on Panama’s chess (banking) board since Bancolombia will become the largest bank not only in Panama but also in Central America managing assets estimated at 17 billion dollars in Panama and 52 billion dollars in general. Now the Colombian bank will have 19% of the total assets of Panama’s International Banking Center, which includes general license banks and international license totaling 89 thousand 771 million dollars in assets.
At the regional level, Bancolombia will have 8 million customers, 38,000 employees and, although the business plan is yet to be finalized, promises stability for employees, customers and 2,300 employees in Panama.
Meanwhile, the bowing out of HSBC will reflect a corporate strategy to sell many of its operations in Latin America, with Panama being one of the most important. Panamanian Bankers yesterday lamented the departure of HSBC, but also welcomed the new stake by the Colombian bank.
Let us just hope that the inevitable changes that come with this important buy out of HSBC will not force out the thousands of account holders from the U.S. and the former Canal Zone who found a secure and relatively inexpensive home for their pension checks in this international bank.
Article source: Panama América