HSBC Holdings plc announced its wholly owned subsidiary, HSBC Overseas Holdings (UK) Limited, has entered into an agreement to sell its banking business in Canada (HSBC Canada) to Royal Bank of Canada (RBC), subject to regulatory and governmental approvals, (the Transaction).

RBC will acquire 100 percent of the issued common equity of HSBC Canada for a base cash consideration of $10.1 billion. In addition, RBC will acquire all the preferred shares and the outstanding subordinated debt issued by HSBC Canada and held by the HSBC Group for approximately $800 million and $700 million, respectively. The transaction is expected to be completed in late 2023.

Financial impacts of the Transaction on the HSBC Group (consolidated basis) are currently expected to be (based on financials as of Sept. 30, 2022):

The sale agreement follows a strategic review of HSBC Canada, which is among Canada’s premier international banks with more than 130 branches and over 780,000 retail and commercial customers. The review considered HSBC Canada’s relatively low market share and the Group’s ability to invest in HSBC Canada’s expansion and growth in the context of opportunities in other markets, and concluded that the best course of action strategically for the HSBC Group and HSBC Canada was to sell the business. The transaction will unlock significant value for the HSBC Group.

Noel Quinn, CEO of HSBC Group, commentedm “HSBC Canada is a high performing and profitable bank, with strong leadership and exceptional people. I am grateful to the whole team for their hard work in supporting our clients over many years. We decided to sell following a thorough review of the business, which assessed its relative market position within the Canadian market and its strategic fit within the HSBC portfolio, and concluded that there was a material value upside from selling the business.

“I am pleased that we have reached an agreement with RBC. The deal makes strategic sense for both parties, and RBC will take the business to the next level. We look forward to working closely with RBC's leadership team to ensure a smooth transition for our clients and colleagues. Our Group strategy is unchanged, and closing this transaction will free up additional capital to invest in growing our core businesses and to return to shareholders.”

"HSBC Canada offers the opportunity to add a complementary business and client base in the market we know best and where we can deliver strong returns and client value given our financial strength and award-winning service," said Dave McKay, President & CEO, RBC. "This also positions us as the bank of choice for commercial clients with international needs, newcomers to Canada and affluent clients who need global banking and wealth management capabilities. It will help us better serve global clients looking to invest and grow in Canada."

"This acquisition builds on our core domestic retail business and expands our international product capabilities," said Neil McLaughlin, Group Head, Personal & Commercial Banking, RBC. "We look forward to welcoming HSBC Canada's talented employees after the transaction closes and supporting them as they continue to serve their clients. With strong cultural and risk alignment and a shared focus on client service, we can build together on HSBC Canada's leading international products."

HSBC Canada has $134 billion in assets as of September 30, 2022, approximately 130 branches and 4,200 full-time equivalent employees. Its commercial bank brings strong capabilities focused on international business clients, including in liquidity management, trade finance, global cash management and sustainable finance. HSBC Canada's wealth and personal banking business serves an affluent client base, with particular strength in meeting the needs of international clients with connections to Canada. Its strong balance sheet includes a well-diversified loan book and an attractive deposit base.

For the complete press release visit here.