HSBC to sell its Canadian operations for $10 billion to the Royal Bank of Canada
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Summary:
- HSBC has agreed to sell its Canadian operations to RBC.
- HSBC’s share price increased on Tuesday.
- RBC's acquisition represents the country's first significant domestic transaction in ten years.
HSBC to sell its canadian operations to RBC
As the lender curtails its global network outside of Asia in response to demands from its largest investor to separate, HSBC has agreed to sell its Canadian operations to Royal Bank of Canada for $10 billion. On hearing about the purchase, HSBC's shares increased by over 5%. The bank also indicated that it would return some of the proceeds to investors. With the acquisition, RBC gained 130 locations and more than 780,000 retail and business clients. If authorities accept the merger, RBC, who is now Canada's largest lender by assets, would strengthen its position.
The biggest stakeholder at HSBC, the Chinese insurer Ping An, has been exerting consistent pressure on Quinn and chair Mark Tucker to separate the bank's Asian and western operations. In an era of hostile US-China geopolitics, Ping An has criticized the bank for years of subpar performance, chronically high costs, and a declining share price, arguing that the bank can no longer efficiently operate by straddling east and west.
The sale in Canada comes after comparable divestitures of unprofitable consumer businesses in France and the US. When HSBC sold its French retail network to Cerberus for €1 last year, it suffered a $3 billion loss.
The business was Canada's sixth-largest bank with assets of CAD134 billion, and RBC's acquisition of it represents the country's first significant domestic transaction in ten years. Most lenders have chosen to expand in the US instead of Canada due to concerns about competition in that country's highly consolidated banking sector. BNP Paribas and Bank of Montreal reached an agreement last year to sell the San Francisco-based Bank of the West for $16.3 billion.
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Sources: ft.com, finance.yahoo.com
