HSBC Holdings PLC shares rose after the lender agreed to sell its Canadian unit for C$13.5 billion (US$10 billion) in cash and said it is “proactively” considering a one-time dividend or fresh stock buyback.
The shares gained as much as 3 percent in Hong Kong early yesterday, the biggest gain since Nov. 7.
The London-headquartered lender’s dividend payout is an important focus for Hong Kong’s retail base, which historically has owned a large chunk of the bank. The lender caused an uproar in the territory in 2020 when it halted dividend payments at the request of British regulators.
Photo: Bloomberg
HSBC is under pressure from Ping An Insurance Group Co (平安保險集團) of China, its largest shareholder, which has complained about its strategy and poor returns compared with other banks. Ping An has pushed HSBC to consider a spinoff of its Asian operations, a move the bank has rejected.
The news of sale was welcomed by Christine Fong Kwok-shan (方國珊), a councilor for Hong Kong’s Sai Kung District, who has previously led local investors in trying to make claims against the lender for not paying dividends.
“Certainly we welcome they may consider to have a special dividend,” Fong said. “We have to remind HSBC that they should count the last time they revoked the dividend issue, they should add it up and reissue the dividend to us again.”
Fong represents about 500 minority shareholders that support a spinoff of HSBC’s Asian business. She said she considers the sale a “first step,” adding that there is no change in the minority shareholders’ push for HSBC to reorganize its business and refocus on Asia.
HSBC said any distributions related to the deal is likely to be from early 2024 onward, following completion of the transaction.
Meanwhile, Royal Bank of Canada’s planned acquisition of HSBC’s Canadian unit would expand its lead in the country’s heavily concentrated financial market, bolstering its dealings with firms and wealthy individuals, while potentially drawing scrutiny from regulators.
Royal Bank’s rationale for buying HSBC Canada, the country’s seventh-largest bank, centers on its ability to wring costs from the business while cross-selling new products such as credit cards and mutual funds.
While the deal adds only 130 branches and C$134 billion in assets — a fraction of Royal Bank’s nearly 1,200 branches and C$1.8 trillion in assets — it is Royal Bank’s largest acquisition ever and represents a rare chance to quickly grab market share in a Canadian banking landscape dominated by six large firms.
“It’s a unique and once-in-a-generation opportunity to leverage all the investments we’ve already made in building a world-class retail and commercial bank in Canada,” Royal Bank chief executive officer Dave McKay said on a conference call with analysts on Tuesday.
Royal Bank plans to keep the “vast majority” of HSBC Canada employees, although it is too early to tell how many jobs might be eliminated, McKay said on a call with reporters.
Royal Bank has 6,000 open jobs it is looking to fill, so it views the HSBC deal partly as talent acquisition, he said.
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