© Reuters. FILE PHOTO: The HSBC bank logo is seen in the Canary Wharf financial district in London, Britain, March 3, 2016. REUTERS/Reinhard Krause/File Photo
By Divya Rajagopal and Kanishka Singh
TORONTO (Reuters) -Canadian regulators will review the sale of HSBC’s business in Canada to Royal Bank of Canada for C$13.5 billion ($10 billion) in cash, the Canadian government’s finance ministry said on Tuesday.
“The Office of the Superintendent of Financial Institutions (OSFI) will administer the application process and provide a recommendation to the Minister of Finance. The Competition Bureau, under the Competition Act, will also review the transaction,” the finance ministry said in a statement.
“Should we determine that the proposed transaction is likely to harm competition, we will take appropriate action,” Canada’s Competition Bureau told Reuters separately on Tuesday.
The finance ministry said that in assessing such a deal, it takes into account the transaction’s impact on competition, on the stability and integrity of the financial sector, and on public confidence in it.
HSBC, which once billed itself as the world’s local bank and built a global network of retail banking businesses, has in recent years been cutting those back to try to improve profits.
The deal will help RBC consolidate its leading position in one of the world’s most concentrated banking markets, where the top six lenders control about 80% of outstanding loans. RBC’s purchase price reflects a 30% premium to the value some analysts had attributed to HSBC’s Canada business.
HSBC is Canada’s seventh biggest bank with assets of C$125 billion, and it earned C$490 million before tax as of June 30, based on its latest financial results. Analysts had valued HSBC’s Canada business in the range of C$8 billion to C$10 billion.
“The Minister of Finance’s decision will be informed by all required regulatory review processes,” it added.
