The deal: Royal Bank of Canada has agreed to buy HSBC’s Canadian business for CAD $13.5 billion ($10.1 billion) in an acquisition that it says will enhance its global competitiveness.
The bigger picture: Last month, we named RBC as a favorite to buy HSBC’s Canadian arm after rumors began to swirl that the British bank was seeking a buyer.
The deal follows pressure from HSBC’s biggest shareholder, Chinese insurer Ping An, to break up its business to focus on its more lucrative operations in Asia. Although it publicly rejected the suggested split, HSBC has made several changes over the past two years that are in line with a divestiture of its non-Asian operations, including selling its French retail banking arm and exiting its operations in Greece.
Domestic acquisitions are rare in the Canadian banking sector and the deal will be thoroughly scrutinized by domestic regulators keen to avoid the Big Six being overly dominant.
What does it mean for HSBC? The sale of its Canadian business will:
What it means for RBC. The Canadian banking giant’s megadeal can help it to:
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