HSBC Expands Presence In Panama

by Carla Johnson, Investors Offshore.com

27 July 2006

HSBC is to expand its presence in Central America after agreeing with Panama's Banistmo to acquire all of its outstanding shares.

The transaction, which remains subject to regulatory approval, values Banistmo at US$1.77 billion (EUR1.4 billion).

The Banistmo group's principal area of operation is Panama but the group also has a significant presence elsewhere in the region where HSBC does not already operate. According to the bank, this will provide a "solid platform" for future growth in the region.

Banistmo owns 99.39% of Panama's largest bank, Primer Banco del Istmo, which offers a full range of personal, commercial and investment banking services through 42 branches. The Banistmo group also owns the country's largest insurance company, Compania Nacional de Seguros.

These operations in Panama will complement HSBC's existing presence in the country, where HSBC's wholly owned subsidiary, HSBC Bank (Panama) S.A., provides services to personal and corporate customers through 19 branches.

The Banistmo group also has a significant presence across Central America, providing a full range of personal and commercial banking services through a further 106 branches in Costa Rica, Honduras, Colombia and Nicaragua.

Additionally, in February 2006, Banistmo completed the acquisition of a 56 per cent stake in Inversiones Financieras Bancosal SA, the holding company for Banco Banco Salvadoreno which operates through 72 branches in El Salvador.

At 31 December 2005, Banistmo had total assets of US$6,973 million and shareholders' funds of US$695 million. It made a profit after tax of US$115 million in 2005.

Banco Salvadoreno had total assets of US$1,778 million, shareholders' funds of US$160.45 million and made a profit after tax of US$16.9 million during 2005.

"We are delighted to have reached agreement to acquire control of the leading banking group in Central America. This is the culmination of two and a half years' work examining the region and choosing our partner," commented Stephen Green, Group Chairman of HSBC Holdings plc.

"This exciting development will give HSBC a strong presence across a fast growing economic region which, with the ratification of the Central American Free Trade Agreement ('CAFTA'), has encouraging prospects. It will allow us to expand into new markets, in a region of 83 million people, including Colombia, and in which large sections of the population do not currently have bank accounts," he observed.

Upon completion of the acquisition, a senior management team will be selected from both organisations, and will be led by Sandy Flockhart, an HSBC Group General Manager and Chairman and CEO of Grupo Financiero HSBC in Mexico.

Under the terms of the agreement, Banistmo shareholders will be entitled to receive US$52.63 for each share of Banistmo common stock held. The proposed offer has been unanimously approved and recommended by Banistmo's board of directors.

Additionally, shareholders holding in aggregate 65% of the issued share capital of Banistmo have entered into an agreement with HSBC to tender their shares in accordance with the terms of the proposed offer.

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