(Adds Cade, Brazil central bank comments)
By Lawrence White and Guillermo Parra-Bernal
LONDON/SAO PAULO, June 7 (Reuters) - Brazil's antitrustwatchdog Cade is due to reveal on Wednesday whether HSBCHoldings Plc can sell its Brazilian unit to BancoBradesco SA, a decision with big implications for the Britishbank's Chief Executive Officer Stuart Gulliver and shareholders.
Gulliver is counting on the $5.2 billion sale of HSBC BankBrasil Banco Múltiplo SA to boost HSBC's main capital ratio andensure the bank remains the biggest dividend payer amongEuropean banks. Some analysts fear the bank may fail to maintainits payout if the unit's sale is delayed.
"This deal is important because it adds 60 basis points toHSBC's capital strength which gets them to their target andmeans they can maintain the dividend in a weak year forearnings," said Ian Gordon, an analyst at Investec.
Brazil's central bank has already approved the deal, HSBC'sbiggest single asset sale since pledging to shrink its sprawlingglobal business to cut costs and boost profits.
Yet, watchdog Cade has clashed with the central bank in thepast over their roles in supervising M&A in banking. Both saidthey have jurisdiction over the financial sector based on theirinterpretation of the law. The issue is currently being analyzedby Brazil's Supreme Federal Court.
Cade has been reviewing Bradesco's purchase since Februaryand has so far failed to reach a consensus among its directorsthat competition will not be affected, a source familiar withthe discussions told Reuters. The watchdog's scrutiny of thedeal is taking place as Brazil wrestles with the impact of aharsh recession and a sweeping political crisis.
The source, who requested anonymity because of thesensitivity of the issue, said some Cade directors wantedBradesco and HSBC to provide more detail on how customers willbenefit from the combination. Cade has blocked at least fourmajor non-financial industry tie-ups since Brazil's newantitrust law came into effect in 2012.
In finance, the regulator last month imposed restrictions onlender Itaú Unibanco Holding SA's joint venture withMastercard Inc, after a 233-day review into whether thedeal would reduce competition in the credit card sector.
The source said some Cade directors believe the central bankfavours deals that improve the financial strength of the banksbeing acquired at the expense of customers.
In a statement to Reuters, Brasilia-based Cade said that itwill continue to analyze antitrust cases until a Supreme Courtruling determines otherwise and pledged to "dialogue with anyagency regarding the construction of the best possible antitrustarrangement for the country."
In a separate statement, the central bank said banking andfinancial industry competition issues should remain exclusivelywithin its jurisdiction.
STEADY DIVIDEND
Cade's board in April said it should grant approval for thedeal, although the recommendation is not binding and is subjectto approval by a separate Cade court.
The regulator also recommended the two banks agree onmeasures to minimise market concentration, in view of evidenceof low competitiveness in Brazil's banking industry.
A spokeswoman for HSBC in London declined to comment. ABradesco spokeswoman also declined to comment.
Shares of HSBC have fallen by nearly a third in the lastfive years, as restructuring costs and dwindling tradingrevenues have eaten into profits. Yet, steady dividend payouts, which are set to yield 8.6 percent this year, have luredinvestors into HSBC's stock.
Gulliver said in May the disposal would add just over half apercentage point to its key capital ratio, taking it from 11.9percent to 12.5 percent, the mid-point of HSBC's targeted range.
Fitch Ratings at the same time said the deal was crucial toHSBC being able to meet that goal for its capital levels, afterretained earnings sank to their lowest levels since 2004. (Editing by Jane Merriman and Cynthia Osterman)
HSBC Holdings (HSBA)