HSBC Buys Central America's Largest Bank

The British financial giant HSBC today agreed to buy Central America's largest bank Banistmo for $1.7bn (£1bn) as it branches out into a new market.

Banistmo owns 99.39% of Panama's largest bank, Primer Banco del Istmo, and has outlets in Costa Rica, Honduras, Colombia and Nicaragua.

HSBC will pay for cash for Banistmo, with Banistmo investors receiving $52.6 a share - a 25% premium on its closing price yesterday.

HSBC, the world's third largest bank, said the acquisition will allow it to expand into a region of 83 million people, including Colombia, where large sections of the population do not have bank accounts.

"Banistmo will bring us significant market share and growth opportunities in all markets," said Stephen Green, the group chairman of HSBC Holdings. "We have little overlap except in Panama, and we expect to benefit from the scale and knowledge that Banistmo brings from operating in the region."

HSBC sees Latin and Central America as promising areas for expansion to offset slower growth in more markets in Europe, the US and Hong Kong.

The company, which already has a substantial presence in Mexico and Brazil, recently made acquisitions in Paraguay and Argentina, and is seeking permission to operate in Peru.

Banistmo last year had total assets of $6.9bn and shareholders' funds of $695m. It made a profit after tax of $115m.

In March, HSBC reported the biggest profit ever by a British bank, making a pre-tax profit of £11.5bn in 2005, buoyed by new markets. HSBC, which describes itself "the world's local bank", has 129 million customers in 76 countries.