"Keep More Of Canada's Financial Sector Under Canadian Ownership" - Royal Bank Of Canada Cleared To Acquire HSBC's Domestic Arm

Royal Bank Of Canada RY received approval to acquire HSBC Holdings, Plc. 's HSBC domestic unit, keeping more of Canada's banking sector in Canadian hands.

The acquisition, which was proposed on 29th November last year, has a deal value of around C$13.5 billion ($10.2 billion). 

HSBC Group's estimated pre-tax gain is $5.7 billion. The Canadian government has approved the acquisition. 

HSBC said in an exchange filing that the transaction is expected to close in the first quarter of 2024. 

The company is also planning to pay a special dividend of $0.21 per share as a priority use of the proceeds from this sale in the first half of 2024. 

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"The reality is that HSBC Canada only has a market share of around 2%, and we cannot prioritize the investment needed to grow it further", said Noel Quinn, Group Chief Executive, HSBC. 

"It is, therefore, in the best interests of HSBC Canada's customers that the bank becomes part of RBC, which will be able to take it to the next level," Quinn added.

Over the next five years, RBC will build out a Global Banking Hub in Vancouver, representing the bank's commitment to making Vancouver a leading city for financial services. 

The hub will be supported with over 1,000 jobs across multiple disciplines.

RBC will provide $7 billion in financing for the construction, retrofitting, and renovation of affordable and sustainable housing in Canada.

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"Not only will this keep more of Canada's financial sector under Canadian ownership, but it will also allow more Canadians to access the global economy by combining the strength and scale of RBC with the international banking capabilities and financial products that HSBC Canada is known for," said Dave McKay, president and CEO, Royal Bank Of Canada.

RBC will increase its client operations and advice center teams in Winnipeg, Manitoba, creating 100 new jobs.

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Price Action: HSBC shares closed higher by 1.38% to $40.27 on Friday, while RY shares closed higher by 0.6% to $100.78.

Photo via Wikimedia Commons