HSBC plots special dividend after completing sale of Canadian business

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HSBC's stock has taken a hit due to the huge tariffs slapped on Asian countries.
HSBC's stock has taken a hit due to the huge tariffs slapped on Asian countries.

HSBC completed the sale of its Canadian branch to Royal Bank of Canada (RBC) at the end of last week as it continued its pivot away from underperforming businesses to focus on Asia.

The deal, which attracted the attention of regulators and was confirmed last Friday, will see Canada’s largest and seventh-largest lenders merge.

HSBC said the deal will unlock “significant value” for the bank. Completion of the transaction will result in an estimated gain on sale of $4.9bn (£3.9bn) in HSBC’s first quarter results.

Due to the gain on sale, HSBC’s CET1 ratio, a measure of a bank’s resilience, will increase by 0.7 percentage points. The bank is expected to announce a special dividend of 21 cents (16.7p) per share in its results, which will be published at the end of the month.

“Completing this deal is another important milestone in HSBC’s transformation, and it will provide capital that will enable us to grow our core businesses and reward our shareholders for their loyalty, including through an intended special dividend of $0.21 per share,” Noel Quinn, HSBC’s chief executive said.

According to some estimates, HSBC has built up a sizable £6bn presence in Canada since the 1980s. Its Canada branches and offices will open for business on Monday, April 1, 2024, as RBC locations.

Dave McKay, chief executive of RBC, said: “Today marks one of the most exciting times of our 155-year history and a pivotal milestone in our long-term growth story as we welcome 4,500 employees and 780,000 clients from HSBC Canada”.

“This once-in-a-generation opportunity will show Canadians how our combined organisation will deliver an enhanced banking experience, create better value for clients and strengthen our communities,” he continued.

To assuage regulators’ concerns, RBC committed to creating new jobs in Canada and building a new ‘Global Banking Hub’ in Vancouver.

HSBC has withdrawn from a number of markets over the past couple of years, including France and Greece as it doubles down on Asia, where it already makes the majority of its money.