In a significant move to consolidate its financial landscape, Canada granted approval on Thursday for the Royal Bank of Canada’s (RY.TO) C$13.5 billion ($10.2 billion) acquisition of HSBC’s (HSBA.L) domestic unit. This acquisition further solidifies the grip of Canada’s top lenders on the market. However, the approval comes with several conditions, including RBC establishing a global banking hub in Vancouver, waiving fees linked to the transfer of mortgages from HSBC to RBC, and ensuring job protection for HSBC’s Canadian workforce.
As part of the agreement, RBC is mandated to increase its client operations center workforce in Winnipeg by 10%, provide $7 billion in financing for affordable housing construction across Canada, and commit to maintaining banking services at a minimum of 33 HSBC branches. The establishment of the Vancouver hub is expected to support over 1,000 jobs, creating approximately 440 net new jobs in British Columbia, according to statements from Minister of Finance Chrystia Freeland. HSBC, responding to the development in an exchange filing, expressed cooperation with RBC to progress the deal, anticipating its closure in the first quarter of 2024. The international bank is also contemplating a special dividend of 21 cents a share from the proceeds in the first half of 2024. RBC sees the acquisition as a strategic move to enhance its domestic business and global standing, particularly benefiting from HSBC’s international money movement capabilities, as highlighted by Neil McLaughlin, Head of Personal & Commercial Banking Group, in a recent interview.