RBC’s $10 Billion Buyout of HSBC’s Canadian Unit Gets Regulatory Nod

Canada’s regulatory authority, the Competition Bureau, recently greenlighted the Royal Bank of Canada’s (RBC) intent to acquire HSBC’s Canadian arm for a sum of C$13.5 billion ($10 billion). This decision clears obstacles for RBC, the nation’s top bank, to finalize its most significant buyout ever.

Even though the bureau did express reservations about diminishing competitiveness between Canada’s largest and its seventh-largest financial institutions, it ultimately concluded that HSBC Canada has a marginal competitive footprint compared to other players in the sector.

The planned acquisition is set to bolster RBC’s already commanding presence in a Canadian banking landscape where six banks hold sway over roughly 80% of all banking assets. RBC emphasized the regulator’s endorsement as a crucial juncture in the transaction’s approval journey, which started in November of last year. The bank also plans to actively participate in upcoming reviews from other key bodies like the Office of the Superintendent of Financial Institutions (OSFI) and Canada’s Department of Finance.

In response to the decision, HSBC Canada stated that it moves them closer to obtaining all the needed regulatory approvals. The acquisition is slated for completion in early 2024.

This favorable judgment from the Competition Bureau arrives amidst increasing concerns from consumer advocacy groups regarding the concentrated nature of Canada’s banking industry.

Legal expert Joshua Krane, specialized in fields like competition and antitrust law at McMillan, observed that it’s uncommon for the bureau to issue such encouraging reports, highlighting the importance for RBC.

Historically, the last attempt for a buyout of this scale in Canada’s banking sector goes back to the early ’90s. Back then, RBC’s bid to acquire Bank of Montreal was thwarted by regulatory bodies.

In the broader context, Canadian banks continue to seek growth through mergers and acquisitions, often eyeing the U.S. market for expansion. Notably, Laurentian Bank, a smaller-scale Canadian financial institution, is rumored to be exploring sale options.