BRITAIN’S biggest bank HSBC has sold its Canadian business to Royal Bank of Canada (RBC) for $10.1bn (£8.4bn) in a move that may save some face with disgruntled Asian investors demanding the firm be broken up.
The Canary Wharf headquartered lender said today it plans to redistribute a chunk of the $5.7bn (£4.7bn) profit it will make on the sale.
HSBC has been under intense pressure from Asian investors led by Chinese insurer, Ping An, the bank’s largest investor, to slim down its huge global footprint and focus on profitable areas of the business.
Its China and Hong Kong arms generate pretty much all its overall profits.
The Canadian sale could help HSBC fight back against Ping An’s breakup campaign by signalling its intention to operate as a trimmer bank in the future.
Asian shareholders were starved of payouts from HSBC during the Covid-19 crisis due to UK regulators preventing banks from distributing dividends to ensure they retained enough capital to cope with rising pandmeic-related defaults.
That led Ping An to back a demerger. However, HSBC could “appease those investors still frustrated that dividends were curtailed” by handing over a fraction of the proceeds from the Canadian arm sale, analysts at Jefferies said.
The shareholder goodies will be funnelled through a one-off share buyback or dividend and will come on top of existing capital return programmes.
Western investors and politicians have slammed HSBC for failing to condemn Beijing’s crackdown on pro-democracy protests in Hong Kong.
News emerged last month that HSBC was sizing up ditching its Canadian business.
Noel Quinn, chief executive of HSBC, said the sale was given the green light after a “review… concluded that there was a material value upside from selling the business”.
Quinn has repeatedly denied HSBC is planning to ditch its Asian arm and has argued it would erode value for shareholders.
RBC will absorb HSBC’s 130 branches and over 780,000 retail and commercial customers in Canada. The deal will complete late next year and shareholder giveaways will start in 2024.
RBC said the purchase will “add a complementary business” to its sprawling group.
The investment house recently snapped Brewin Dolphin, one of the UK’s oldest fund manager, in a sign of its intention to expand to its global reach.
HSBC’s shares shot to near the summit of the FTSE 100, gaining near five per cent.