HSBC says exploring sale of Canadian operations for latest disposal

HSBC Holdings Plc is exploring a sale of its operations in Canada, the latest move to streamline the lender that is seeking to head off a call by its largest shareholder to split up.
 

A potential sale of HSBC’s 100% equity stake in HSBC Bank Canada is among the options being explored, the lender said in a statement. The review is at an early stage and no decisions have been made, the bank said.

“We are currently reviewing our strategic options with respect to our wholly owned subsidiary in Canada,” HSBC said in a statement. “HSBC regularly reviews its businesses in all its markets.”

The lender has instructed investment bankers at JPMorgan Chase & Co. to sound out buyers, according to a person familiar with the matter. Sky News reported the news earlier.

A disposal of the Canadian unit could reap nearly $10 billion, according to Bloomberg Intelligence. HSBC’s shares rose on the news and were up 3.4% as of 10:50 a.m. in London.

Canadian Operations
 

The British lender has had operations in Canada since 1981, according to its website. HSBC Bank Canada is the seventh largest bank overall in the country and operates more than 130 branches across the country.

Canada accounted for about 4% of HSBC’s pretax profit and 3% of its global customer accounts at the end of last year, the bank said in its annual report. The firm’s Canadian operations produced $768 million of pretax profit, the bulk of which was from commercial banking.

While Canada is a relatively small part of HSBC’s overall business, it was the third largest contributor to the company’s commercial banking profits in 2021 behind the UK and Hong Kong and ahead of markets like mainland China, the US and India.

The bank employed 5,348 staff in its Canadian unit at the end of last year, according to accounts filed by the business. HSBC Bank Canada provides the full suite of the bank’s services, including retail and commercial banking, as well as wealth management and investment banking.

What Bloomberg Intelligence Says
 

With about $7 billion of equity and $70 billion in loans at fiscal 2021, a disposal price could near $10 billion, based on Canadian bank valuations, though would not be material to group strategy, growth or capital return capacity.

Jonathan Tyce, BI banking analyst

The news comes as HSBC tries to fight off calls from shareholder Ping An Insurance Group Co., which has argued for a break-up of the bank. HSBC has fought back against the Chinese insurer and has said that there is little merit in spinning out its Asian operations.

HSBC is in the midst of its own turnaround that is focused on building up its position in Asia, particularly in wealth management, while culling operations no longer deemed relevant. The bank has already sold off units in the US, France and Greece.