HSBC is planning to sell its Canadian banking business. The multi-billion dollar operation is one of the company’s most prominent international banking brands. The British multinational bank has taken the initiative to make the business more profitable in the face of pressure from shareholders. As part of this initiative, less profitable businesses in the West are being divested, and the focus is being increased on Asia’s more profitable asset management. In addition, earlier in 2021, the company announced winding up its retail banking business in the US. The article contains HSBC to Sell Multibillion-dollar Canadian Business.
HSBC is already in talks with US investment bank JP Morgan to sell its Canadian banking operations. This deal can be done for 800-900 million dollars. A source close to the talks confirmed this information to Reuters. However, JP Morgan and HSBC declined to comment on the matter.
An HSBC spokesman said the review was at an early stage. No final decision has been taken yet. However, one option is to sell 100 percent of HSBC Bank Canada’s shares.
According to Reuters, the winding up or sale of businesses in Western countries is actually part of HSBC’s broader plan. The firm wants to make larger investments in wealth management businesses for the wealthy in Asia. That is why Europe’s largest bank is turning to Asia after closing business from many countries of the world. HSBC said in a statement, “We are reviewing strategic options with respect to our wholly-owned Canadian banking business.”
However, the bank did not comment on the potential value of the Canadian business. According to the bank’s latest financial results, HSBC Canada’s assets as of June 31 were 12,500 billion Canadian dollars ($9,000 billion). Besides, the total equity of the bank was 5.8 billion Canadian dollars. HSBC has been trying to exit the country for years. Although the country’s business is profitable. In the first half of this year as well, the bank made a pre-tax profit of 490 million Canadian dollars. This means that any company will have to spend a lot of money to buy a Canadian business.
The bank once billed itself as the world’s local bank. However, under pressure from investors, the bank is now seeking to establish itself as more profitable. As part of this strategy, HSBC is exiting low profit or loss making operations.
HSBC Bank operates commercial, consumer and investment banking and market services businesses in Canada. HSBC is the seventh-largest by assets in Canada and the largest international bank dominating the market, according to data from financial information firm Refinitiv.
The firm announced its exit from the US consumer banking business in May 2021. The firm then announced the sale of its French consumer banking operations in June. Top shareholder Ping An Insurance Group in China undertakes to split Asia and Western operations. There is pressure to split the program to avoid becoming victims of geopolitical tensions between Washington and Beijing. Ping An has more than 8 percent stake in HSBC. The Chinese insurer claims the split will create up to $35 billion in additional market value for Asian banking operations. The move will also free the company from the need to raise an additional $8 billion in the capital. Although HSBC is headquartered in London, two-thirds of its total profits come from Asia.
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