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https://i-invdn-com.investing.com/trkd-images/LYNXMPEJ801RN_L.jpg(Reuters) -Canada’s Competition Bureau said on Friday that Royal Bank of Canada’s (RBC) C$13.5 billion ($10 billion) offer to buy HSBC’s domestic unit was unlikely to hurt competition, clearing the way for the country’s largest bank to push ahead with its biggest acquisition.
Still, the regulator found that the deal would “result in a loss of rivalry between Canada’s largest and seventh-largest banks.”
The bureau said HSBC Canada’s competitive impact was limited when compared to other financial institutions and found that the unit of the British bank had achieved limited market penetration in most financial services.
The deal is expected to help RBC consolidate its leading position in one of the world’s most concentrated banking markets, where the top six lenders control about 80% of banking assets.
RBC said the bureau’s opinion is a key milestone in the approval process for the deal, which was announced in November 2022, and that it would collaborate with ongoing reviews by the Office of the Superintendent of Financial Institutions (OSFI) and Canada’s finance ministry.
“We welcome the competition bureau’s decision, bringing us one step closer to regulatory approval on this transaction,” HSBC Canada said.
The deal is expected to close in the first quarter of 2024.
The favorable regulatory view is a big boost for RBC and was announced against the backdrop of growing resentment among consumer activists against the country’s concentrated banking sector.
“Typically the bureau’s reports are not as positive as the one that was released today … That’s a good sign for RBC,” said Joshua Krane, a lawyer who focuses on competition, antitrust and foreign investment matters at McMillan.
The last time a deal of this size was attempted in Canada was in the early 1990s, when RBC wanted to acquire rival Bank of Montreal (TO:BMO). That acquisition was blocked by regulators.
The highly regulated Canadian banking sector is active in the mergers and acquisition space as banks seeking growth opportunities look to expand into the United States. Laurentian Bank, a smaller Canadian bank, is said to be looking at a potential sale.