RBC gets a Christmas gift from Ottawa as $13.5 billion HSBC deal is approved

But what does it mean for HSBC Canada's employees?

RBC gets a Christmas gift from Ottawa as $13.5 billion HSBC deal is approved
Steve Randall

RBC can proceed with its acquisition of HSBC Canada in what the big six bank has hailed an “historic transaction [that] keeps more of Canada’s banking sector in Canadian hands.”

The deal, originally announced at the end of November 2022, followed HSBC’s announcement that it was seeking a buyer for its profitable unit amid sharper focus on its operations in Asia. RBC quickly emerged as the front runner.

The Canadian finance minister’s approval of the $13.5 billion transaction Thursday means that the two banks can now work together on a smooth transition for HSBC Canada’s 4,000 employees and 800,000 clients.

RBC’s CEO and president Dave McKay thanked the finance ministry, OFSI, and Competition Bureau for their review of the acquisition, which will add a significant amount to RBC’s loan book, further cementing its position as Canada’s largest lender. As of September 30, HSBC Canada's total assets were $134 billion.

"The acquisition of HSBC Canada is good for the country and Canadians,” he said. “Not only will this keep more of Canada's financial sector under Canadian ownership, but it will also allow more Canadians to access the global economy by combining the strength and scale of RBC with the international banking capabilities and financial products that HSBC Canada is known for."

HSBC’s decision to exit the Canadian banking market reflects the challenges facing the global banking industry. Although the firm is long-established in Canada, it only has a 2% market share, and that limits the amount of investment the British-owned firm can allocate to the business unit.

“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,” HSBC CEO Noel Quinn told Bloomberg.

Shareholders of HSBC will be looking forward to a special dividend from the proceeds of the sale, which HSBC confirmed it is still committed to paying.

RBC – recently named Canada’s most valuable brand - believes it can make savings of around 55% on HSBC Canada’s cost base, around $740 million, according to a client note from Canaccord Genuity analysts Matthew Lee and Betty Yang.

“We view HSBC as an ideal asset for the firm given the substantial cost-saving potential associated with operating within a shared geography,” they wrote. “We believe the transaction uniquely positions RBC to attract global, high-value customers and increase the product suite that are offered to current HSBC Canada customers.”

What about employees?

All employees of HSBC Canada are being guaranteed a minimum of six months continued employment after the transaction closes, except for circumstances involving voluntary departures or misconduct.

This will provide an opportunity to explore roles within RBC which are likely to include the development of its Global Banking Hub in Vancouver over the next few years with around 1,000 jobs, and the creation of 100 jobs at an expanded client operations and advice centre teams in Winnipeg, Manitoba.

The approval by the finance minister also includes some other commitments from RBC including:

  • Continue providing banking services at a minimum of 33 HSBC branches, as well as all ATMs in these branches, for four years
  • Waive certain fees for HSBC clients, including for transferring mortgages to RBC, international money transfers by non-business clients, and premium accounts for 18 months
  • Provide $7 billion in financing for affordable housing construction across Canada, to support the construction of an estimated 25,000 new homes
  • Provide additional retail lending support for redeveloping single-family homes into multi-family homes
  • Maintain Mandarin and Cantonese banking services at HSBC branch locations that RBC will continue to operate

"By bringing the capabilities, international connections and exceptional talent of HSBC Canada to RBC, we are creating an enhanced banking experience for our clients, which includes new international products and innovative digital capabilities to help them achieve their financial goals," said Neil McLaughlin, group head, Personal & Commercial Banking, RBC. "At the same time, HSBC Canada clients will gain access to RBC's award-winning personal, commercial, wealth and capital markets offerings, while continuing to enjoy a wide range of international banking services."

Further information regarding the next stages of the transaction are expected in the coming days.