HSBC Seeks Buyer for Canadian Unit - Analyst Blog
07 September 2011 - 11:00PM
Zacks
On Tuesday, HSBC Holdings Plc (HBC) confirmed
that the company is in talks with the potential acquirers regarding
the sale of its Canadian retail brokerage business, which employs
120 advisors.
Late last month, Reuters had reported about the
possible sale of HSBC’s Canadian retail brokerage business, which
manages about C$16 billion ($16.3 billion) in investors' money.
However, at that time the company had refused to acknowledge the
same.
Among the foreign banks, HSBC has the largest presence in
Canada. So, the sale of its retail brokerage business would be
significant with respect to foreign companies’ confidence in the
Canadian market. However, the possible sale would not include the
company’s online brokerage and trust services in Canada, the
company asserted.
As the Canadian market is highly consolidated, the chance to
expand through merger and acquisitions is limited for the banks.
So, the HSBC unit should be lucrative to all the financially-sound
Canadian banks.
Although, the company declined to reveal the names of the
potential buyers, the business has drawn interest from National
Bank Financial, a unit of National Bank of Canada
(NA). National Bank is one of largest six banks in Canada without
any notable foreign exposure. Given National’s location and
expansion capacity, it seems to be most suitable buyer for the HSBC
unit.
The proposed sale of the Canadian unit is in sync with HSBC’s
long-term strategy to reduce costs up to $3.5 billion through
worldwide restructuring by 2013 and cut back retail banking.
Earlier in August, Capital One Financial
Corporation (COF) had announced a definitive agreement to
buy HSBC’s U.S. credit card business for $32.7 billion. The deal
will help HSBC reap an estimated post-tax gain of $2.4 billion.
The divestiture of the Canadian retail brokerage business should
bring long-term benefits for both HSBC and the acquirer. While
after selling the unit, HSBC will be able to concentrate on its
emerging market strategy, the acquirer would be able to expand in
the highly-consolidated Canadian market.
HSBC retains a Zacks #4 Rank, which translates into a short-term
‘Sell’ rating.
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