HSBC has agreed to sell its Canadian banking operations to the Royal Bank of Canada (RBC) in a deal valued at $10.1bn (C$13.5bn).

Under the terms of the all-cash transaction, RBC will buy 100% of the common shares of HSBC Canada.

Additionally, RBC will acquire all the preferred shares and the outstanding subordinated debt issued by HSBC Canada and held by HSBC for around $0.8bn and $0.7bn, respectively.

As of 31 December 2021, HSBC Canada’s net assets stood at $5.4bn and its gross assets were worth $94.6bn, including $54.2bn in customer loan balances. The company also had $58.1bn in customer deposits.

With a branch network of 130, HSBC caters to more than 780,000 retail and commercial customers and employs 4,200 people. 

For RBC, the deal, which builds on its existing retail capabilities, adds an attractive client base and expands international banking capabilities. 

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RBC president & CEO Dave McKay said: “HSBC Canada offers the opportunity to add a complementary business and client base in the market we know best and where we can deliver strong returns and client value given our financial strength and award-winning service.

“This also positions us as the bank of choice for commercial clients with international needs, newcomers to Canada and affluent clients who need global banking and wealth management capabilities. It will help us better serve global clients looking to invest and grow in Canada.”

The agreement, according to HSBC, is the result of a strategic evaluation that considered HSBC Canada’s relatively low market share and the group’s ability to invest in its development and growth in light of opportunities in other markets.

HSBC Group CEO Noel Quinn said: “The deal makes strategic sense for both parties, and RBC will take the business to the next level. Our Group strategy is unchanged, and closing this transaction will free up additional capital to invest in growing our core businesses and to return to shareholders.”

Subject to customary closing conditions and regulatory approval, the deal is expected to close by late 2023.  Earlier this month, Ping An, a Chinese insurance major, and the largest shareholder of HSBC asked the bank to slash expenses by laying off employees and selling companies in small, peripheral ex-Asian regions.