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HSBC Holdings Plc confirmed on Tuesday, Nov. 29, that it has sold its business in Canada to the Royal Bank of Canada for $10 billion or $13.5 billion in Canadian dollars. It will be paid in cash thus a dividend or bumper payout to shareholders is possible later.
According to Reuters, the deal between HSBC and the Royal Bank of Canada is expected to be completed in the last quarter of 2023. The former said that this negotiation would also result in a pre-tax gain of $5.7 billion for the company.
HSBC is one of the most recognizable financial institutions in the world, with a global network of retail banking businesses in many countries. However, in recent years, it has been getting rid of them due to a slowdown in performance. The bank is making these cuts in an effort to improve profits.
At any rate, the sale of its Canadian business comes as the company focuses on its strategy of putting more of its resources into its core markets. The decisions were also influenced by the pressure coming from HSBC’s largest shareholder, Ping An, who has been demanding for the bank to improve its performance.
The British universal bank stated that it may give back some of the profits from the sale that is expected to give a multi-billion pre-tax gain through buyback or dividend starting in 2024 once the deal is closed.
With the acquisition of HSBC, RBC will be able to expand its market share in the country. It will also grow its branches to 130 and add over 780,000 retail and commercial clients.
“HSBC Canada is a high-performing and profitable bank with strong leadership and exceptional people,” HSBC Group’s chief executive officer, Noel Quinn, said in a statement. “I am grateful to the whole team for their hard work in supporting our clients over many years.”
He added, “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.
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