Royal Bank of Canada’s proposed acquisition of HSBC’s Canadian unit—RBC’s largest acquisition in its 150-year history—would grow an already sizeable lead within the country’s “heavily concentrated financial market,” according to Bloomberg.
The magnitude of this transaction is not lost on Royal Bank Chief Executive Officer Dave McKay, who described the HSBC acquisition as a “once-in-a-generation opportunity” to build on everything his bank has worked toward.
Royal Bank plans to achieve about up to $800 million in cost savings by combining information-technology systems, among other “pre-tax expense synergies.”
However, the $10 billion deal—slated for completion by the end of next year—requires approval from multiple organizations, including the Competition Bureau and the Department of Finance Canada.
The finance department has stated that it will consider the interests of consumers and business customers, competition in the sector, and consequences for stability of the financial sector. It holds the authority “to impose any terms and conditions and to require any undertaking” considered appropriate by the department head, which is currently Chrystia Freeland.
The fact that the Competition Bureau tried to block Rogers’ takeover of Shaw may have RBC somewhat concerned.
However, McKay believes the transaction will get approved because the deal will empower RBC on the global stage “without compromising Canadians’ access to a competitive, diverse market here at home.”
Canada is somewhat infamous for limited choice with regards to bank offerings, but the Royal Bank chief says this trend has shifted in recent times and now the market is more competitive and diverse thanks to technological innovation and regulatory advances.
McKay notes how the country has 50 banks, even more credit unions, and “hundreds of fintechs,” pointing to Canada’s rapidly growing financial technology startup space.
As Canada’s largest bank already, RBC employs more than 64,000 employees who serve 14 million clients.
It is interesting to speculate on how heavily the growing presence of Canada’s fintech startups might weigh on the judgement of this generational deal.
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