HSBC, Europe's largest bank, reported that the sale is conditional on regulatory approval in Paraguay and is likely to complete in the second quarter of 2006. The consideration will be paid at completion of the transaction.
UK-based Lloyds TSB has had a subsidiary in Paraguay for 85 years and its assets in the South American country are valued at around $175 million.
The Lloyd's Paraguayan arm currently has six branches and around 22,000 customers and HSBC claims that the deal provides it with a presence throughout the Mercosur trading bloc. Mercosur, established in 1991, covers Argentina, Brazil, Paraguay and Uruguay.
HSBC Holdings managing director for South America, Youssef Nasr, said: "This transaction gives HSBC a presence throughout Mercosur, an exciting and growing economic association and enables us to better serve the needs of our regional and international customers, particularly in the areas of credit, trade, payments and treasury."
Lloyd's claimed in a statement that the impact of the sale of its Paraguayan business on company results is not expected to be material.