HSBC is to buy the consumer and corporate banking businesses of Lloyds TSB Middle East, assets that are worth close to Dh3 billion (US$816.7 million).
The deal, which will lead to Dh2.8bn of assets changing hands if approved by regulators, would reduce Lloyds TSB's 35-year presence in the region to little more than a private bank and with services for customers with accounts managed offshore.
Lloyds will sell its onshore banking businesses alongside one branch and a customer service centre in Dubai, while retaining its regional wealth management arm.
Its parent company Lloyds Banking Group, which is 41 per cent owned by the British government as the result of a government rescue at the height of the financial crisis, announced its intention last summer to exit 15 of the markets in which it operates.
Customers will see no change in operations during this time, said Richard Musty, the head of the bank's UAE operations.
"Lloyds TSB has a long and successful history in Dubai and we are proud of what we have achieved and the performance of our business locally," he said.
The future of the 233 staff at Lloyds TSB Middle East in Dubai who are affected by the transaction is now uncertain.
"The business being acquired from Lloyds has approximately 8,800 personal and commercial customers and a loan book of approximately $573m as at 31 December 2011," said HSBC.
Royal Bank of Scotland, another British bank that received a government capital injection to prevent it from collapsing during the financial crisis, sold its retail banking business in the region to Abu Dhabi Commercial Bank in 2010.
For HSBC, the acquisition comes amid a global cost-cutting drive that has resulted in two rounds of lay-offs in the region, cutting staff numbers by 560 last year. The bank has made exits from its retail banking business in Kuwait, retail brokerage operations in the UAE, and its regional private equity business.
"Opportunities in this region are scarce," said Simon Cooper, the chief executive of HSBC Middle East. "Very few acquisitions have taken place in this region in recent years and I'm delighted HSBC is able to grow through acquisitions in a market where mergers and acquisitions are relatively rare."
HSBC Middle East has eight branches in the UAE, the maximum allowed by the Central Bank for international lenders. The Lloyds TSB transaction would take its total to nine, a tally exceeded only by Standard Chartered among international lenders, which has 11 branches as a result of acquisitions prior to the Central Bank's limits.
HSBC is in consultation with the Central Bank about the number of branches it operates.
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