The Competition Bureau believes that Royal Bank’s proposed purchase of HSBC Canada is unlikely to prevent or lessen competition in Canada.
Although some evidence indicated that HSBC Canada was a “vigorous” competitor and a “significant” rival to RBC in the provision of particular financial services, the Competition Bureau finds that HSBC Canada had an impact “limited” competitive advantage with other financial institutions.
Royal Bank announced last November that it had reached an agreement to acquire the Canadian subsidiary of HSBC Bank, a transaction valued at $13.5 billion.
The approval of the Office of the Superintendent of Financial Institutions and that of the Canadian Department of Finance are the next steps to be taken.
CIBC analyst Paul Holden said he expects the go-ahead from both bodies.
“The Competition Bureau’s report suggests the transaction is on track to close as planned within the first three months of next year,” he said in a note sent to clients on Friday.
This expert adds that it does not appear that Royal will have to take significant steps to meet the requirements of the Competition Bureau and, therefore, the anticipated contribution to Royal’s earnings per share remains 6%.
In its report released on Friday, the Competition Bureau also noted that it assessed measures of market concentration and said it found that, in most cases, post-merger market shares would remain at levels where the Commissioner will not challenge generally not a merger based on a competition concern related to the unilateral exercise of market power.
The Bureau also says it assessed the evidence relating to the dynamics of competition in each of the relevant markets and concluded that effective competitors would remain after the transaction, including the other major Canadian banks.
TD analyst Mario Mendonca had previously calculated the deal would see the Royal behind 75% of all loans in Ontario and British Columbia. In total, about 134 billion in assets would pass into the fold of the Royal, the equivalent of an increase of about 7% in assets at RBC.
As of last fall, HSBC Canada had 4,200 full-time equivalent employees, including 450 in Quebec.
The six largest Canadian banks control about 80% of the total of all banking sector assets.