Is HSBC’s Canada sale to RBC enough to placate critics like Ping An as it doubles down on Asia?

Name: HSBC’s break-up dilemma: why bank’s largest shareholder is pushing for change
Uploaded: 2022-12-03T02:00:09.000Z
Duration: 5 min 25 s
Description: HSBC’s break-up dilemma: why bank’s largest shareholder is pushing for change

Lack of scale, international connectivity a driving factor as HSBC agreed this week to sell Canadian operation to Royal Bank of Canada for US$10 billion

Slightly smaller than mainland China in terms of deposits held, Canada business has been profitable for the past decade, outpacing its US operations

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Chad Brayin LondonandEnoch Yiuin Hong Kong

Published: 10:00am, 3 Dec 2022

After more than four decades of doing business in Canada, HSBC is calling it quits, extending its retreat from markets around the world deemed peripheral to its strategy of serving international clients and businesses. But is it enough to appease its critics, chiefly Ping An Insurance Group of China?

On the surface, the Canadian business would seem to have been the perfect fit for HSBC’s strategy of serving wealthy customers and businesses from China and other parts of Asia internationally.

Its biggest concentration of branches are in urban areas favoured by new immigrants from Asia, such as Toronto and Vancouver, and more than 1.8 million people, or about 5 per cent of Canada’s population, identify themselves as being of Chinese descent.

Plus, it has been consistently profitable, outpacing the bank’s much larger United States operations on a pre-tax basis over the past three years despite holding about half the amount of customer deposits. Last year alone, the Canadian business generated a pre-tax profit of US$768 million versus US$528 million in the US.

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HSBC’s break-up dilemma: why bank’s largest shareholder is pushing for change

However, HSBC agreed to sell the business to rival Royal Bank of Canada (RBC) for C$13.5 billion (US$10 billion) this week, following a strategic review in October, as the lender places greater emphasis on Asia and operations that play into its strategy of connecting wealth and businesses globally.

“Although HSBC is a global bank, most of its revenue has come from the Asia-Pacific market in recent years, and the business in the Asia-Pacific region has also shown a relatively strong growth trend,” said Kenny Ng Lai-yin, a strategist at Everbright Securities International. “Therefore, selling the Canada business is believed to be a strategic consideration, by which HSBC can concentrate more resources on the Asia-Pacific market.”