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."
Critics say merger will decrease competition
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.
Canada's six biggest banks control around 93 per cent of banking assets, and this deal will boost it to about 95 per cent.
One analyst who touted HSBC's key role in lowering borrowing costs through its presence in Canada called it "a sad day for Canadian mortgage consumers."
Mortgage strategist Robert McLister said HSBC had a different model than the major banks in advertising Canada's lowest and most transparent uninsured mortgage rates. He said the larger banks were regularly 20 to 80-plus basis points higher on fixed and variable rates.
HSBC Canada felt it could offset the impact of lower rates by attracting "well-qualified customers" who defaulted less and had more non-mortgage assets, McLister said.
"They were an everyday low-price lender, which is extremely valuable in the Canadian market," McLister added, noting the difficulty for smaller financial players in amassing market share in Canada where the Big Six banks are so dominant.
In calling for the deal to be blocked, Conservative Leader Pierre Poilievre said Canada's banking sector is overly concentrated and the loss of HSBC Canada will only make it worse.
He pointed to the Competition Bureau's finding that the bank was a rate disrupter on mortgages, the loss of which could leave Canadians paying higher rates.
"The Trudeau Liberals should have supported competition in banking & mortgage lending by blocking the merger. Now all Canadians will pay the price," he said on X, formerly Twitter, on Thursday.
Freeland responded to Poilievre on the platform, saying that HSBC was leaving Canada.
"By blocking this, Pierre Poilievre would have risked 4,000 workers losing their jobs, investors losing faith in Canada as a place to do business, and 780,000 Canadians losing banking services. That's not a serious position — it's reckless & irresponsible."
But McLister said that for Canadians who count one of the big banks as their preferred lender, the "key benefit of HSBC was the gift it gave borrowers in leverage."
"I've spoken to countless customers over the years that would go to the HSBC website, they would find a rate, they would take it to their bank, and generally, the bank would not match the rate, but it would get close enough so that the customer didn't have to leave the bank or go elsewhere," McLister said.
Bank will put $7B towards affordable housing
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.
McKay didn't commit to maintain HSBC Canada jobs beyond the agreed timeline, saying the bank hadn't been able to learn in-depth about employees until the deal was approved.
"Give us six months and we're going to get to know the employees, and we'll manage a path going forward."
Quinn, HSBC chief executive, said the bank 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."
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."
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2023-12-22 18:02:06Z
CBMiPGh0dHBzOi8vd3d3LmNiYy5jYS9uZXdzL2J1c2luZXNzL3JiYy10YWtlb3Zlci1oc2JjLTEuNzA2NzUxOdIBIGh0dHBzOi8vd3d3LmNiYy5jYS9hbXAvMS43MDY3NTE5
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