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November 29, 2022

RBC to acquire HSBC Canada

November 29, 2022 - Royal Bank of Canada announced it has entered into an agreement to acquire HSBC Bank Canada.

Under the terms of the agreement, RBC will acquire 100% of the common shares of HSBC Canada for an all-cash purchase price of $13.5 billion. All of HSBC Canada's earnings from June 30, 2022 through close will accrue to RBC1.

The Canadian financial sector is is highly competitive with 50 banks and hundreds of credit unions and fintechs competing to serve Canadians. HSBC Canada accounts for around 2% of Canadian deposits and mortgages.

"HSBC Canada offers the opportunity to add a complementary business and client base in the market we know best and where we can deliver strong returns and client value given our financial strength and award-winning service," said Dave McKay, President & CEO, RBC. "This also positions us as the bank of choice for commercial clients with international needs, newcomers to Canada and affluent clients who need global banking and wealth management capabilities. It will help us better serve global clients looking to invest and grow in Canada."

"This acquisition builds on our core domestic retail business and expands our international product capabilities," said Neil McLaughlin, Group Head, Personal & Commercial Banking, RBC. "We look forward to welcoming HSBC Canada's talented employees after the transaction closes and supporting them as they continue to serve their clients. With strong cultural and risk alignment and a shared focus on client service, we can build together on HSBC Canada's leading international products."

HSBC Canada has $134 billion in assets as at September 30, 2022, approximately 130 branches and 4,200 full-time equivalent employees. Its commercial bank has capabilities focused on international business clients, including in liquidity management, trade finance, global cash management and sustainable finance whilst its wealth and personal banking business serves an affluent client base.

RBC aim to combine HSBC Canada's international products with RBC's capabilities to help clients meet their financial goals, build their wealth and grow their businesses.

Under the terms of the agreement, RBC will acquire 100% of the common shares of HSBC Canada for an all-cash purchase price of $13.5 billion. All of HSBC Canada's earnings from June 30, 2022 through close will accrue to RBC6. The purchase price represents a 9.4x multiple of HSBC Canada's estimated 2024 adjusted earnings of $1.4 billion assuming fully realized expense synergies. On this basis, the acquisition is expected to be approximately 6% EPS accretive relative to 2024 consensus estimates for RBC7. This acquisition is expected to have an Internal Rate of Return8 of 14% and a marginal return on tangible common equity of 27%. RBC expects its CET1 ratio10 to exceed 11.5% upon close11.

RBC expects to achieve approximately $740 million, or 55%, in fully realized annual pre-tax expense synergies based on HSBC Canada's estimated 2024 non-interest expense base, and incur total acquisition and integration costs of approximately $1 billion. RBC will purchase all of the existing preferred shares and subordinated debt of HSBC Canada held directly or indirectly by HSBC Holdings plc at par value.

Closing is expected by late 2023 subject to customary closing conditions including regulatory approvals, obtained in the ordinary course. All amounts are in Canadian dollars.

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