Royal Bank of Canada’s (RY.TO) (RBC) C$13.5 billion ($10 billion) deal to purchase HSBC’s (HSBA.L) domestic operation was deemed unlikely to harm competition by Canada’s Competition Bureau on Friday, paving the way for the nation’s largest bank to proceed with its largest acquisition.
The regulator nevertheless concluded that the merger would “result in a loss of rivalry between Canada’s largest and seventh-largest banks.”
When compared to other financial institutions, the bureau determined that the competitive impact of HSBC Canada was minimal and that its market penetration in the majority of financial services was also modest.
The acquisition is anticipated to assist RBC in maintaining its strong position in one of the most competitive banking markets in the world, where the top six lenders control about 80% of all banking assets.
RBC claims that the bureau’s conclusion is a critical stage in the clearance procedure. The merger is currently being continuously evaluated by the Office of the Superintendent of Financial Institutions (OSFI) and Canada’s finance minister.
The competition bureau’s decision, which moves the transaction’s regulatory approval one step closer, is welcomed, according to HSBC Canada.
The transaction should be completed in the first quarter of 2024.
The regulatory opinion in RBC’s favor comes as consumer advocates’ anger over the nation’s highly consolidated banking sector is growing, which is good news for RBC.
Usually, the bureau’s reports aren’t as upbeat as the one that was provided today. That’s fantastic news for RBC, according to Joshua Krane, a McMillan attorney who concentrates on antitrust, competition, and foreign investment issues.
When RBC sought to acquire competitor Bank of Montreal (BMO.TO) in the early 1990s, it was the last time a deal of this size was undertaken in Canada. The authorities prohibited that acquisition.
As banks search out expansion prospects and consider expanding into the United States, the highly regulated Canadian banking industry is active in the mergers and acquisitions market. A smaller Canadian bank named Laurentian Bank (LB.TO) is rumored to be considering a sale.
