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RBC is buying HSBC Canada
November 29, 2022
5:07 am
Bill
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Apparently RBC to acquire HSBC.

November 29, 2022
6:42 am
JohnnyCash
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Bill said
Apparently RBC to acquire HSBC.  

If true, it's unfortunate news as promos like these from HSBC will likely come to an end.

November 29, 2022
6:57 am
InterestThis
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November 29, 2022
7:59 am
AltaRed
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It will take upwards of a year for this deal to close and it is by no means certain that the regulator will allow all parts to be purchased by RBC.

The question really is how HSBC Canada conducts its business in the interim.

November 29, 2022
2:56 pm
LK
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From an email I received today:

Today, HSBC Group announced an agreement to sell its 100% equity stake in HSBC Canada (and its subsidiaries) as well as subordinated debt held by HSBC Group to Royal Bank of Canada (RBC). Subject to regulatory review and approval, it is expected to be completed by late 2023.

What do I have to do?

I know you will have questions about what this means for you. For now, nothing changes for you and you do not need to take any action. You will continue to bank with HSBC as you usually do. All terms of your agreements stay the same – deposits, lending and investments – and there is no change to how we will provide service.

Pending regulatory approval, there will be a transition period of several months to establish how to integrate the operations and clients of HSBC Canada into RBC at completion of the sale, but there is no immediate change. Our teams at HSBC and RBC are committed to making the transition as smooth as possible for you. We will be back in touch with more specific information about the products and services you hold with us. In the meantime, whether you have a Relationship Manager, use our online/mobile services or a combination of both, you can expect to continue to receive the same level of service that you always have.

About RBC

RBC is Canada’s biggest bank and one of the largest in the world, by market capitalization. In Canada, RBC has almost 65,000 employees serving 14 million clients. It is consistently recognized as a leader in delivering excellent client service, effective advice and industry-leading products. It also has an expansive network of branches and advisors as well as top ranked digital capabilities. We are confident that this transaction will allow our combined company to compete even harder to provide you with the highest value, competitive rates and best service.

To you and all of our valued clients in Canada who have trusted us to fulfil their ambitions in both good and challenging times for over 40 years – a heartfelt thank you. It’s our privilege to work with you and we look forward to continuing to serve you at RBC in the coming years. If you have any questions, please reach out to your relationship manager at HSBC or get in touch via any of our regular contact channels.

Regards,

Linda Seymour

President & CEO

November 30, 2022
12:11 pm
KamWest
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JohnnyCash said

If true, it's unfortunate news as promos like these from HSBC will likely come to an end.  

Don't expect much, remember when they bought Ally bank and all the deals stopped.

Royal also owns City National Bank

November 30, 2022
1:30 pm
Loonie
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Yes, the promos will disappear.
I hope the Competition Bureau can see through this grab, and I think they can. It's obvious this will create a less competitive banking environment for consumers. On the other hand, I'm not sure what happens to HSBC if RBC doesn't pick it up.

November 30, 2022
1:52 pm
here2day2
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Loonie said
Yes, the promos will disappear.
I hope the Competition Bureau can see through this grab, and I think they can. It's obvious this will create a less competitive banking environment for consumers. On the other hand, I'm not sure what happens to HSBC if RBC doesn't pick it up.  

The deal will clear all three reviews with RBC taking all of HSBC in its entirety. HSBC put itself up for sale, had an auction with RBC coming out as the winner. This isn’t similar to the Rogers-Shaw Merger that execs on both sides are touting as rainbows and butterflies and good for Canadians and competition. RBC has stated that they won’t make any concessions/divestures of HSBC’s assets in order to push a deal through.

The government won’t oppose this deal because:

a) It involves a foreign bank
b) This is a foreign bank that has a lot of Chinese influence through their shareholders
c) HSBC only represents 2% of the Canadian banking market.

While it’s unfortunate we’re losing a competitor, let this be a lesson for those that truly want competition, to stop supporting the organizations that are against it or collude to make it seem like there’s “competition” going on (i.e. Big Six).

November 30, 2022
2:13 pm
InterestThis
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Also be sure to own plenty of stock in the big banks!

November 30, 2022
5:51 pm
Doug
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They're expecting at least $740 annual million in synergies (i.e., significant cost savings) in their estimated 2014 annual earnings. That's quite a significant cost savings. I expect that to come from, primarily, branch consolidations. RBC will likely look at their complementary branch footprints and aim to consolidate and close at least 80-100 branches (some will be existing RBC branches, beyond what RBC already planned to consolidate on its independently, but the majority will likely be HSBC branches). Beyond that, a net negative for credit union, National Bank, and other customers, as RBC says they plan to consolidate HSBC Canada clients onto their banking system, and HSBC Canada clients will be migrated to the RBC Royal Bank ATM network, meaning HSBC Bank Canada's 130+ surcharge-free ATM locations on The Exchange ATM Network will disappear after the closing of the acquisition. National Bank of Canada to be largest non-credit union member of The Exchange post-close.

Remainder of synergies likely to come from overlapping support functions (i.e., I.T., HR, etc.) , banking system consolidation, and product suite consolidation.

Cheers,
Doug

December 1, 2022
7:48 am
canadian.100
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Doug said
They're expecting at least $740 annual million in synergies (i.e., significant cost savings) in their estimated 2014 annual earnings. That's quite a significant cost savings. I expect that to come from, primarily, branch consolidations. RBC will likely look at their complementary branch footprints and aim to consolidate and close at least 80-100 branches (some will be existing RBC branches, beyond what RBC already planned to consolidate on its independently, but the majority will likely be HSBC branches). Beyond that, a net negative for credit union, National Bank, and other customers, as RBC says they plan to consolidate HSBC Canada clients onto their banking system, and HSBC Canada clients will be migrated to the RBC Royal Bank ATM network, meaning HSBC Bank Canada's 130+ surcharge-free ATM locations on The Exchange ATM Network will disappear after the closing of the acquisition. National Bank of Canada to be largest non-credit union member of The Exchange post-close.

Remainder of synergies likely to come from overlapping support functions (i.e., I.T., HR, etc.) , banking system consolidation, and product suite consolidation.

Cheers,
Doug  

With those positives, there has been no real change in the price for RBC shares - the market does not seem to have taken any decision - perhaps too early?

December 1, 2022
8:13 am
Doug
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canadian.100 said

With those positives, there has been no real change in the price for RBC shares - the market does not seem to have taken any decision - perhaps too early?  

Nah, the reality is the addition of HSBC Canada is still small potatoes in the context of RBC's balance sheet and income statement. It's more than a rounding error, certainly, but it in terms of overall size of the acquiring bank, it's similar in scope to when Scotia acquired Tangerine Bank and/or MD Financial Management, Limited. Also, RBC tends to trade at a premium share price relative to its peers, so it's not what I would call undervalued by any stretch.

Cheers,
Doug

December 1, 2022
8:47 am
AltaRed
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HSBC Canada is about 10% the size of RBC in a number of measures. It is measurable but not material. IOW, RBC is buying about 2 years of growth it would otherwise have to get otherwise but more importantly, it is adding Canadian market share to its business (from about 20% to 22%).

There will be leakage from some HSBC customers going elsewhere but RBC would have included that in its valuation. It would be quite hard to go wrong if RBC can actually cut 55% of HSBC's costs out of the business.

December 1, 2022
10:15 am
COIN
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When the big banks acquired Ally, Simplii and Tangerine the quality of products and service for you and I went down.

December 1, 2022
1:19 pm
canadian.100
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Doug said

Nah, the reality is the addition of HSBC Canada is still small potatoes in the context of RBC's balance sheet and income statement. It's more than a rounding error, certainly, but it in terms of overall size of the acquiring bank, it's similar in scope to when Scotia acquired Tangerine Bank and/or MD Financial Management, Limited. Also, RBC tends to trade at a premium share price relative to its peers, so it's not what I would call undervalued by any stretch.

Cheers,
Doug  

Interesting - RBC does sell at a premium to the other banks the RBC P/E is 12.15 while the P/E for BNS is 8.38. I believe RBC announced yesterday they will be increasing their next quarterly dividend plus an incentive to shareholders to reinvest dividends (DRIP) to acquire new shares @ 20% less than market value. A good incentive!

December 1, 2022
2:31 pm
savemoresaveoften
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canadian.100 said

Interesting - RBC does sell at a premium to the other banks the RBC P/E is 12.15 while the P/E for BNS is 8.38. I believe RBC announced yesterday they will be increasing their next quarterly dividend plus an incentive to shareholders to reinvest dividends (DRIP) to acquire new shares @ 20% less than market value. A good incentive!  

DRIP at 20% discount ?!, u meant 2% or it is an RBC typo.

December 1, 2022
2:47 pm
canadian.100
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savemoresaveoften said

DRIP at 20% discount ?!, u meant 2% or it is an RBC typo.  

I made a typo error - the discount is 2%

December 1, 2022
5:54 pm
christinad
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There are 2 articles in globe and mail how the rbc takeover is a loss for canada, one from a mortgage expert and one from rob carrick.

https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-rbc-buying-hsbc-canada-banking-loss/

I didn’t realize how international hsbc was in terms of their brokerage:

But InvesDirect has long been a leader in one respect – offering clients access to global stock markets. Clients have access to 30 domestic and international markets, and can access North American, Hong Kong, French and German markets on a mobile device.

Maybe there is another brokerage that does this or possibly rbc will keep this at a greater cost.

and Robert Mclister says they helped to keep mortgages competitive. You can bet rbc won’t play that role!

December 1, 2022
6:00 pm
christinad
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Just read the robert mclister article

https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-hsbc-has-been-undercutting-the-big-banks-on-mortgages-since-2016-an/

Rbc says they will fold in the mortgage business. I gather hsbc had small mortgage share but kept the mortgage market competitive.

December 2, 2022
6:29 am
mordko
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I used to have HSBC mortgage and still have around 200k in InvestDirect.

Don’t know the mechanics, but suspect RBC will migrate InvestDirect customers to RBC’s Direct Investing. “InvestDirect” name is used by HSBC in other jurisdictions and presumably uses local HSBC subsidiaries to allow trading on foreign stock exchanges.

HSBC mortgage was a really good product. Not only was it cheap but gave a lot of flexibility to repay early with minimum/no penalties. In that respect it was closer to more competitive products available on the British market. I still have an unsecured line of credit with HSBC, which isn’t used. Its there in case the chequing account goes negative by mistake.

Clearly a bad deal for consumers.

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