HSBC is set to sell its banking business in Canada to Royal Bank of Canada (RBC) for a cash consideration of $10.1 billion, subject to regulatory and government approvals.
RBC will acquire 100% of the issued common equity of HSBC Canada. The firm will also buy all the preferred shares and the outstanding subordinated debt issued by HSBC Canada and held by the HSBC Group for an additional $1.5 billion.
The transaction is expected to complete in late 2023.
HSBC says that following a strategic review of its business in Canada, where it has more than 130 branches and over 780,000 retail and commercial customers, it considered its “relatively low” market share and its ability to invest in market expansion in the context of opportunities in other markets, and came to the conclusion that the best course of action was to sell the business.
“We decided to sell following a thorough review of the business, which assessed its relative market position within the Canadian market and its strategic fit within the HSBC portfolio, and concluded that there was a material value upside from selling the business,”explains Noel Quinn, CEO of HSBC Group.
On reaching an agreement with RBC, Quinn adds that the deal “makes strategic sense to both parties”.
“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.”