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Canada has officially granted approval for the proposed USD 10.1 billion acquisition by Royal Bank of Canada (RBC) of HSBC Holdings’ Canadian unit, a significant move arriving more than a year after the announcement of the deal. Canadian Finance Minister Chrystia Freeland highlighted that RBC consented to adhere to various conditions encompassing Canadian employment levels, customer service standards, and financial contributions aimed at facilitating the construction of affordable housing.
This endorsement elevates the RBC-led purchase to the pinnacle of Canadian domestic banking history as the largest-ever transaction in the sector. For HSBC, the sale forms part of a comprehensive restructuring strategy, marking a strategic retreat from North America and segments of Europe while redirecting focus towards Asia and the Middle East. HSBC Chief Executive Noel Quinn expressed intentions to consider a special dividend in 2024 upon the completion of the sale.
Despite the approval, a representative from RBC refrained from immediate comment regarding the development. Initially revealed in November 2022, the deal entails the transfer of nearly USD 100 billion in assets from HSBC to RBC, encompassing Canadian retail, commercial, and investment-banking businesses. Both parties anticipate finalizing the transaction in the initial quarter of 2024.
The proposed transaction navigated a pivotal obstacle in September, when Canada’s antitrust regulator, the Competition Bureau, determined that the deal was unlikely to impede competition within the banking sector. The bureau’s analysis suggested that despite competitive offerings on mortgages, savings accounts, and other products, HSBC’s Canadian division “had achieved only modest market penetration”.
Nevertheless, the deal encountered eleventh-hour regulatory uncertainty following opposition party lawmakers’ plea in Canada urging Freeland to block the transaction. Led by Conservative Party leader Pierre Poilievre, whose party held a substantial lead over the incumbent Liberals in public-opinion polls, concerns were raised about the perceived excessive concentration in Canada’s banking sector. Poilievre emphasized that greenlighting the deal would seemingly eliminate the prospect of fostering increased competition within Canadian banking.
RBC’s Chief Executive, Dave McKay, cautioned against blocking the deal, citing that it “would be a very bad signal to foreign investors to not move forward with this, as we have to attract capital into this country.”
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