RBC buys HSBC Canada for $13.5 billion

Royal Bank of Canada has agreed to buy the Canadian arm of HSBC for $13.5 billion.

RBC CEO Dave McKay said the deal provides an opportunity to add an additional business and client base.

“This also positions us as the bank of choice for commercial clients with international needs, newcomers to Canada and affluent clients who require global banking and wealth management capabilities,” McKay said Tuesday.

“It will help us better serve our global clients who want to invest and grow in Canada.”

130 branches in Canada

“The deal makes strategic sense for both parties, and will take RBC’s business to the next level,” HSBC Group CEO Noel Quinn said in a statement.

“Our team’s strategy has not changed, and closing this transaction will free up additional capital to invest in growing our core businesses and return to shareholders.”

The Canadian arm of Britain’s HSBC has been up for sale this year as the parent company has come under pressure from its biggest shareholder, China’s Ping An Insurance Group, to boost profits.

At more than $13 trillion, the price makes it the most expensive deal ever for a Canadian bank to buy another Canadian bank, even though the so-called Big Five spend more than that on foreign acquisitions.

HSBC has been operating in Canada since 1981 and currently has 130 branches and approximately 4,200 employees.

According to the last quarterly report, HSBC Canada had assets of $125 trillion at the end of June, and operating income of more than $1.1 trillion in the first half of this year. HSBC holds about two percent of all bank deposits and mortgages in Canada.

The deal is expected to close next year, pending regulatory and shareholder approval.

Because of the size of the merger, it requires the approval of numerous government agencies, including the Competition Bureau, the Office of the Superintendent of Financial Institutions and the Department of Finance.

“In evaluating a transaction, the Minister of Finance may take into account the rights and interests of consumers and business customers, including the effect of the transaction on the level of competition in the sector, and its effects on the stability and integrity of the financial sector and public confidence.” he said in a statement.