HSBC Explores Canada Unit Sale, But Domestic Players Might Be Discouraged In Bidding: Reports

  • HSBC Holdings plc HSBC is considering selling its business in Canada without disclosing the potential valuation of the business. It has tapped JP Morgan Chase & Co JPM to handle a potential sale.
  • As per the lawyers and analysts, the potential sale could discourage big domestic banks from bidding as the government has charged the antitrust regulator to push for more competition, Reuters reported.
  • Canada is one of the world's most concentrated markets. According to Reuters calculations, the top six banks control about 80% of total assets, about double the saturation of the U.S., where the top five banks control 40%.
  • Related: HSBC's Largest Shareholder Stresses On Asia Business Spinoff To Boost Market Values.
  • Due to high saturation, Canadian banks are expanding overseas to reduce their exposure, and the Competition Bureau Canada was granted more powers to prevent further concentration.
  • Sale to a Chinese bank would not have antitrust problems but could be entangled in national security concerns.
  • Analysts estimate HSBC's Canadian unit could be valued at around $5.9-$7.4 billion.
  • Analysts said smaller lenders, such as the National Bank of Canada NTIOF and some Chinese suitors, are likely to show interest.
  • The report cited Keefe, Bruyette & Woods' research note that HSBC's footprint in western Canada could give an instant diversification to Montreal-based National Bank.
  • Price Action: HSBC shares are down 0.63% at $26.84 during the premarket session on the last check Thursday.
  • Photo Via Company
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