April 14th, 2024

RBC cements dominant status as it closes HSBC Canada takeover


By Ian Bickis, The Canadian Press on April 3, 2024.

RBC chief executive Dave McKay speaks at the banks annual meeting in Toronto on April 6, 2017. RBC says it plans to disclose a key climate metric that the New York City Comptroller has been pushing it to adopt. THE CANADIAN PRESS/Frank Gunn

TORONTO – Royal Bank of Canada has reinforced its status as Canada’s biggest companyafter successfully navigating its takeover of HSBC Canada, making it an even bigger target for critics.

The bank is now worth about $193 billion, some $50 billion ahead of second-place TD Bank, after RBC saw a roughly 24 per cent rebound in its stock price over the two months before the federal government approved the deal just before Christmas.

Besides regulatory approval, some of the most daunting aspects of the takeover happened this past week, as the bank shifted some 780,000 HSBC customers and 4,500 employees over to its systems and transformed about 100 branches to RBC blue.

Chief executive Dave McKay credits the “near-flawless” transition to extensive planning and dress rehearsals, which the company had ample time to do in the 18-month space between agreeing to the $13.5 billion deal and it finally happening.

The bank is now turning to integration, and the opportunities ahead, McKay said in an interview.

“We’re extremely excited about the future, and about the ability to build a bank that connects Canadian businesses and consumers to the world.”

The deal faced criticism for allowing such a dominant player to get even bigger, in what is already a concentrated banking sector, but McKay said it will help with productivity.

“Productivity is about scale. Productivity is about connecting businesses and consumers globally, and doing more business globally and building our country.”

The scale of the company, however, has also meant it has been the focus of intense scrutiny over its record. Nowhere has that been the case more than on its climate policies.

Being so big has helped lead RBC to be one of the world’s top financiers to fossil fuels in recent years. The Rainforest Action Network pegged the bank’soil and gas funding for 2022 at more than US$38 billion to make it rank second globally.

The activity has led to grassroots campaigns against the bank, along with pressure from major international asset managers.

The head of New York City’s pension system, overseeing US$242 billion in assets, pushed RBC in a shareholder resolution to disclose how its clean energy financing stacks up against its fossil fuel record.

In pushing for the change, Comptroller Brad Lander said banks have made little progress in the energy finance transition and weren’t living up to their net-zero commitments.

RBC’s board of directors rejected the proposal in its proxy circular as premature, saying its disclosures provide sufficient transparency, but the bank has since changed its mind following talks with the comptroller.

“We think it’s an important metric going forward,” said McKay, committing to releasing the ratio in its 2024 climate report.

The shift is one of several moves on climate that the bank has made in recent months, including the release of a framework on how it plans to engage with clients, a commitment to triple its renewable funding to $15 billion by 2030, the launch of an internal climate institute, and funding promises on innovation.

“All of those are designed to encourage the transition, and enable the transition of our economy,” said McKay.

“We have to do it in a way that brings all our citizens with us, and aligns with the overall objectives of our government and our society.”

While the bank has made significant moves on the climate file, he said the bank can’t move any faster than Canada’s overall shift.

“RBC can’t get ahead of its own country … we can’t move faster.”

He pushed back against some of the more vocal extremes of those pressing for the bank to do more, which have included personal attacks, saying the bank is being unfairly criticized.

“The expectations of a very small part of the economy are excessive on banks, but it’s a very, very small part.”

And just as the bank has faced the most scrutiny because of its scale, that size will also allow the bank to help get an increasing number of renewable energy and other climate efforts going, said McKay.

“We have connectivity into all corners of the economy, and we’re best placed to help these opportunities find investors, and find financing to get off the ground.”

This report by The Canadian Press was first published April 3, 2024.

Companies in this story: (TSX:RY)

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