HSBC says it expects the sale of its Canadian operations to RBC to officially close in the first quarter of 2024 after the transaction passed its final hurdle on Thursday with the approval of Finance Minister Chrystia Freeland.
The green light from Freeland came after the Competition Bureau approved the $13.5-billion takeover in September and carries conditions on RBC, including that none of HSBC Canada’s 4,000 employees be fired within six months of the closing date, or two years for front-line staff.
Banking services must continue to be provided at a minimum of 33 HSBC branches for four years.
The federal government has also launched a consultation on strengthening competition in the financial sector that will look into questions like whether mergers between large banks should be formally banned and whether the government should limit how large banks can grow through acquisitions.
HSBC said in a brief update Friday that it and RBC continue to make progress on implementation of the transaction following the federal approval.
“We appreciate the thorough and thoughtful approach Canada’s regulators have taken to this sale since the HSBC Group announced its strategic decision to exit the Canadian market, including public consultations and the report by the Competition Bureau,” said HSBC chief executive Noel Quinn in a statement.
He said HSBC has had a presence in Canada for many years, but “the reality is that HSBC Canada only has a market share of around two per cent and we cannot prioritize the investment needed to grow it further.”
“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.”
Many had called for RBC’s takeover of HSBC Canada to be blocked, arguing it would decrease competition in what is already a heavily concentrated banking sector.
RBC chief executive Dave McKay said in an interview Thursday that there is extensive competition in Canadian banking and that the deal would not lessen that in “any shape or form.”
He said the bank also agreed to provide $7 billion in financing for affordable housing construction across Canada as part of the conditions of approval.
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But Keldon Bester, executive director of the Canadian Anti-Monopoly Project, said Ottawa missed an opportunity “to protect competition and affordability in the banking sector.”
“While commitments related to the financing of affordable housing appear positive, there is little in the way of protecting Canadian homeowners in a higher interest rate environment,” he said in a statement,
“The announcement of a consultation on strengthening competition in the financial sector is welcome but it is unfortunate that the motivating event is a reduction in that very competition.”
Quinn said HSBC felt reassured by RBC that as part of its long-term growth strategy, the Canadian bank would invest “in building out their own international capabilities to meet the needs of both our individual and corporate clients.”
“We believed that this transaction complied with competition law requirements and had faith that Canada’s authorities would follow due process and the rule of law,” he said.
“Canada is fortunate in that it has many strong banks operating in a highly competitive market.”
— with files from Ian Bickis in Toronto
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