HSBC’s Canadian Business Is Under The Hammer

HSBC’s Canadian Business Is Under The Hammer

about 1 year ago2 mins

Mentioned in story

HSBC announced on Tuesday that it’s selling its Canadian business to Royal Bank of Canada (RBC).

What does this mean?

Ping An Insurance Group, HSBC’s biggest shareholder, has a simple but unchanging goal: get the bank to separate its thriving Asian businesses from the western heirlooms gathering dust on the mantelpiece. The banking giant hasn’t given in so far – but it has been auctioning off western businesses all the same, including its US and French operations just last year. No one was particularly surprised on Tuesday, then, when HSBC announced it’s selling its Canadian unit to RBC for a smooth $10 billion in cash. For RBC, the deal means getting its mitts on a roster of business clients that bank internationally, plus about 130 more branches. And for HSBC, it means a chance to keep investors sweet through a one-off dividend or buyback.

HSBC stock
Source: Google Finance

Why should I care?

Zooming in: Selling up and shipping out.

HSBC isn’t doing precisely what Ping An wants, but this is the next best thing: after all, the firm is gradually getting rid of precisely the western businesses the group shuns, and it’s spent billions in a buying bonanza in fast-growing regions like Singapore, India, and China in recent years. And now, amid reports the lender’s gearing up for even more acquisitions, the banking giant could be setting some of this cash aside to cover further eastern splurges.

The bigger picture: Not so fast.

HSBC should be careful not to count its chickens before they’ve hatched. As things stand, you see, RBC is Canada’s biggest bank by assets – so regulators might be wary of a deal that could reduce competition and hurt customers, especially in Canada’s concentrated banking sector. That’s why firms like the Bank of Montreal and Toronto-Dominion Bank settled on US-based targets for their own deals in the past year, the two biggest ever seen in Canadian banking.

Canadian bank assets
Source: Bloomberg


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