RBC gets regulatory clearance for $10bn acquisition of HSBC Canada

The Canadian Competition Bureau has ruled that Royal Bank of Canada (RBC)’s C$13.5bn ($10bn) acquisition of HSBC’s banking business in Canada (HSBC Canada) is not expected to lead to a significant reduction or prevention of competition under the Competition Act.

The all-cash deal was announced in November 2022. However, following an extensive review, the regulator determined that the acquisition would lead to a reduction in competition between Canada’s largest and seventh-largest banks.

According to the Canadian Competition Bureau, the country’s five largest banks, which include RBC, BMO, Scotiabank, TD Bank, and CIBC, control the majority of the country’s banking assets and transactions. However, HSBC Canada stands out as one of the primary alternative national institutions accessible to Canadians, said the regulator.

The Competition Bureau also identified ongoing concentration in key financial services markets, with the five largest Canadian banks dominating the services available to Canadians.

Furthermore, it identified significant barriers to entry and expansion in many of these markets, along with conditions that could encourage coordinated behaviour among firms as a result of the proposed deal.

The regulator’s report was prepared to provide input for the Minister of Finance’s ongoing evaluation of the proposed transaction. The Bank Act mandates Ministerial approval for all mergers in Canada’s banking sector, said the regulator.

In a statement, the Competition Bureau, said: “The Bureau’s assessment considered a broad range of sources of information, including over 1500 submissions from Canadians in response to the Bureau’s public request for information issued on 1 May 2023.”

As of 30 September 2022, HSBC Canada had C$134bn ($99bn) in assets, nearly 130 branches, and 4,200 full-time equivalent employees.

At the time of announcing the deal, RBC stated that HSBC Canada’s commercial bank division excels in serving international business clients, offering strong capabilities in areas such as liquidity management, trade finance, global cash management, and sustainable finance.

HSBC Canada’s wealth and personal banking sector caters to an affluent clientele, with significant expertise in meeting the requirements of international clients linked to Canada. The institution maintains a solid balance sheet characterised by a diversified loan portfolio and an appealing deposit base, said RBC.