Royal Bank of Canada (RBC) is set to acquire 100% of the issued common equity of HSBC Canada for a base cash consideration of USD 10.1 billion. Additionally, RBC will acquire all the preferred shares and the outstanding subordinated debt issued by HSBC Canada and held by the HSBC Group for approximately USD 0.8 billion and USD 0.7 billion, respectively. The transaction is expected to complete in late 2023.
The sale agreement was preceded by a strategic review of HSBC Canada, which is reportedly considered among the country’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. According to the official press release, the conclusions of the assessment pointed to the fact 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.
An estimated pre-tax gain for HSBC Group amount to c. USD 5.7 billion. This figure includes the recycling of c. USD 0.6 billion in foreign currency translation reserve losses. The estimated pre-tax profit on the sale is set to be recognised through the consolidation of HSBC Canada’s results into the Company’s financial statements the remaining gain on sale recognised at completion. There would be no tax on the gain recognised at completion.
As a consequence of the gain on sale and the disposal of the HSBC Canada RWAs, the HSBC Group’s CET1 ratio will be enhanced by an additional c. 130 bps over and above our existing capital plans (based on HSBC Group RWAs of USD 828 billion and HSBC Canada RWAs on a PRA basis of USD 31 billion).
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