Royal Bank of Canada (RBC), the seventh-largest bank in Canada, agreed to purchase HSBC Holdings Plc's Canadian unit for $13.5 billion in cash. By doing so, RBC will increase its business clients and strengthen its retail business on the West Coast, while HSBC will concentrate on Asia.
The acquisition will add around 130 branches to RBC, which is currently Canada's largest bank by assets, including 45 in British Columbia on the West Coast. The Toronto-based business will obtain a sizable commercial banking network, with many of its clients working in international commerce and banking. The net interest income of HSBC Holdings Plc and Royal Bank of Canada increased significantly, as reported by the company.
Likewise, the net profit of HSBC Holdings Plc and Royal Bank of Canada decreased significantly.
Royal Bank chief executive officer Dave McKay declared in a statement on November 29, 2022, that HSBC Canada "offers the potential to add a parallel customer and business base in the area we know well and where we can produce high returns and client value." This makes RBC the bank of choice for wealthy clientele who want global banking and wealth management capabilities, immigrants to Canada, and business clients with worldwide requirements.
Another of Canada's large banks is making a rare and significant domestic acquisition with this move. Recently, the top lenders in Canada oriented their expansion ambitions on the US since regulators barred mergers in the country's highly concentrated banking sector.
By raising its interest rates by 130 basis points over the bank's target level because of selling its Canadian operations, HSBC will be able to increase the amount of cash returned to shareholders. Investors who have been dissatisfied with the bank's performance in recent years might benefit from HSBC's announcement that it was "proactively" exploring offering a one-time dividend or a new stock repurchase.
According to Joseph Dickerson, an analyst from Jefferies Financial Group Inc., "this purchase is a clear plus for HSBC." Investors who are angry that dividends were cut in early 2020 may find some solace in the associated shareholder repatriation. Following the announcement, shares of HSBC with a London listing increased to 5.5%. In Toronto, Royal Bank share prices fell 0.7% to $132.32 at 9:41 am.
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