Canada Greenlights RBC's $10 Bn HSBC Unit Acquisition With Terms
Canada greenlit Royal Bank of Canada's (RY.TO) CUSD 13.5 billion (USD 10.2 billion) takeover of HSBC's (HSBA.L) domestic unit, marking a move that tightens the grip of the country's leading banks on the market.
The approval comes with conditions. RBC must establish a global banking hub in Vancouver, waive fees tied to the transfer of mortgages from HSBC to RBC and safeguard HSBC's Canadian workforce.
Furthermore, RBC is mandated to increase its client operations center workforce in Winnipeg by 10 per cent, allocate USD 7 billion for affordable housing construction nationwide, and maintain banking services in at least 33 HSBC branches.
The proposed Vancouver hub is estimated to support over 1,000 jobs, creating around 440 new positions in British Columbia, noted Finance Minister Chrystia Freeland.
RBC anticipates the merger, uniting Canada's largest and seventh-largest lenders, will elevate its domestic operations and global standing.
Neil McLaughlin, Personal & Commercial Banking Group Head, highlighted the capabilities HSBC brings, particularly in transacting different currencies and international money movement. He emphasised the growth opportunities arising from this acquisition.
While acknowledging the finance ministry's stipulations, McLaughlin expressed that they haven't veered RBC off its intended course.
The federal banking regulator, the Office of the Superintendent of Financial Institutions, has also endorsed the deal, alongside the Competition Bureau's September approval, citing negligible impact on competition but acknowledging a loss in rivalry.
Opposition to the deal has surfaced, notably from Conservative Party leader Pierre Poilievre, who campaigned against it, expressing concerns over diminished competition and its consequences for consumers.
Despite opposition from various quarters, RBC remains committed to maintaining a competitive market and ensuring a smooth transition for HSBC clients.
For HSBC, the decision to exit the Canadian market is part of a global strategy focusing on Asian markets. CEO Noel Quinn expressed limitations in further growing HSBC Canada's market share, which stands at around 2 per cent.
RBC anticipates finalising the acquisition by the first quarter of 2024, marking one of Canada's largest banking sector deals since the early 1990s.
Recent years have seen Canadian banks eyeing growth opportunities through substantial acquisitions, including BMO's acquisition of U.S. lender Bank of the West and TD Bank's attempted acquisition of U.S. lender First Horizon, which was later called off.
($1 = 1.3282 Canadian dollars)
