HSBC Overseas Holdings (UK) Limited, a wholly-owned subsidiary of HSBC Holdings plc, reported on Tuesday that it agreed to sell its Canadian banking business to the locally-headquartered Royal Bank of Canada (RBC).
The acquisition, which is still subject to governmental and regulatory approval, will allow RBC to obtain 100% of the common equity of HSBC Canada. The deal is valued at $10.1 billion and should be finalized by the end of 2023.
According to the financial data as of September 30, 2022, the sales agreement will provide HSBC Group with a pre-tax gain of $5.7 billion. Assets held by HSBC Canada are valued at $94.6 billion. The Canadian arm of the bank has 130 branches and 4,200 full-time employees, serving nearly 800,000 commercial and retail customers.
HSBC officials acknowledged that the Canadian portion of the business has a "relatively low market share." The limited opportunity to invest in HSBC Canada's growth relative to other markets led to the strategic decision to sell the Canadian arm.
"I am pleased that we have reached an agreement with RBC. The deal makes strategic sense for both parties, and RBC will take the business to the next level. We look forward to working closely with RBC's leadership team to ensure a smooth transition for our clients and colleagues. Our Group strategy is unchanged, and closing this transaction will free up additional capital to invest in growing our core businesses and to return to shareholders," Noel Quinn, the CEO of HSBC Group, commented.
RBC Cements Its Leadership Position
Even before the acquisition of the branches and assets owned by HSBC Canada, RBC was the largest bank in the Land of Maple Leaf. Currently, it has more than 1,200 units that serve about 10 million customers in the country. The additional 800,000 acquired from HSBC Canada will increase its lead over other local players, including Toronto-Dominion Bank and Bank of Nova Scotia.
"HSBC Canada offers the opportunity to add a complementary business and client base in the market we know best and where we can deliver strong returns and client value given our financial strength and award-winning service," Dave McKay, the President & CEO at RBC, said.
RBC stands out not only in Canada but also globally. Internationally, it has 17 million customers, employing 89,000 people.
