Royal Bank of Canada has entered an agreement to buy HSBC Holdings PLC’s Canadian business in a $13.5-billion cash deal that will pad RBC’s lead as Canada’s largest bank, assuming regulators give the transaction the green light.
As part of the deal, which is slated to close by late 2023, RBC will acquire all of HSBC Canada’s shares at a price that works out to 9.4 times the unit’s adjusted 2024 earnings of $1.4 billion, RBC said.
The bank projects the deal will lead to $740 million in annualized pre-tax synergies, while RBC will foot roughly $1.4 billion in total acquisition and integration costs. All of HSBC Canada’s earnings from June 30 will accrue to RBC.
HSBC Canada had $134 billion in assets as of Sept. 30 and has approximately 130 branches and 4,200 employees. Its banking segment holds about two per cent of Canadian deposits and mortgages.
“(HSBC Canada) is a fantastic franchise that operates in our home market in businesses that we are very good at, while also adding complementary products and a differentiated client base,” RBC president and chief executive officer Dave McKay said during an analyst call following the announcement.
“It’s also a strong cultural fit for both our clients and employees,” McKay added. “The transaction is financially compelling as it also creates immediate value for the strategic deployment of excess capital, highly achievable expense savings, and a well-understood revenue cross-sell opportunity.”