The rubber-stamped sale of HSBC’s Canadian operations to Royal Bank will lessen competition on mortgage rates, says one analyst who touted the bank’s key role in lowering borrowing costs through its presence in Canada.
Mortgage strategist Robert McLister called it “a sad day for Canadian mortgage consumers.”
He said HSBC had a different model than the major banks in advertising Canada’s lowest and most transparent uninsured mortgage rates. He said the larger banks were regularly 20 to 80-plus basis points higher on fixed and variable rates.
HSBC Canada felt it could offset the impact of lower rates by attracting “well-qualified customers” who defaulted less and had more non-mortgage assets, McLister said.
“They were an everyday low-price lender, which is extremely valuable in the Canadian market,” McLister added, noting the difficulty for smaller financial players in amassing market share in Canada where the Big Six banks are so dominant.
HSBC gave borrowers ‘leverage’
HSBC Canada’s sale to RBC for $13.5 billion passed its final hurdle on Thursday with the approval of Finance Minister Chrystia Freeland. The minister cited the Competition Bureau’s finding in September, when it also granted approval for the deal, that the acquisition would not stifle competition for mortgage rates, which it said “were most frequently driven by competition from Big Five Banks.”
RBC chief executive Dave McKay also said in an interview Thursday that there is extensive competition in Canadian banking and that the deal would not lessen that in “any shape or form.”
“There’s enormous competition in the Canadian marketplace. There’s over 50 banks, there’s credit unions in every province that compete hard, there’s non-financial competitors. There’s new competitors entering this space all the time,” he said.
But McLister said that for Canadians who count one of the big banks as their preferred lender, the “key benefit of HSBC was the gift it gave borrowers in leverage.”
“I’ve spoken to countless customers over the years that would go to the HSBC website, they would find a rate, they would take it to their bank, and generally, the bank would not match the rate, but it would get close enough so that the customer didn’t have to leave the bank or go elsewhere,” McLister said.
HSBC said in a brief update Friday that it and RBC continue to make progress on implementation of the transaction following the federal approval. The deal is expected to officially close in the first quarter of 2024.
Chief executive Noel Quinn said although HSBC has had a presence in Canada for many years, “the reality is that HSBC Canada only has a market share of around two per cent and we cannot prioritize the investment needed to grow it further.”
“It is therefore in the best interests of HSBC Canada’s customers that the bank becomes part of RBC which will be able to take it to the next level,” he said in a statement.
Conditions on RBC
Freeland’s approval carries conditions for RBC, including that none of HSBC Canada’s 4,000 employees be fired within six months of the closing date — or two years in the case of front-line staff. Banking services must continue to be provided at a minimum of 33 HSBC branches for four years.
RBC also agreed to provide $7 billion in financing for affordable housing construction across Canada as part of the conditions of approval.
The federal government has launched a consultation on strengthening competition in the financial sector that will look into questions such as whether mergers between large banks should be formally banned and whether the government should limit how large banks can grow through acquisitions.
Conservative Leader Pierre Poilievre rises to vote on a motion during a session in the House of Commons, Friday, Dec. 8, 2023 in Ottawa. On Thursday, Poilievre pointed to the Competition Bureau’s finding that the bank was a rate disrupter on mortgages, the loss of which could leave Canadians paying higher rates. (Adrian Wyld/The Canadian Press)
Many had called for RBC’s takeover of HSBC Canada to be blocked, arguing it would decrease competition in what is already a heavily concentrated banking sector.
In calling for the deal to be blocked, Conservative Leader Pierre Poilievre said Canada’s banking sector is overly concentrated and the loss of HSBC Canada will only make it worse.
He pointed to the Competition Bureau’s finding that the bank was a rate disrupter on mortgages, the loss of which could leave Canadians paying higher rates.
“The Trudeau Liberals should have supported competition in banking & mortgage lending by blocking the merger. Now all Canadians will pay the price,” he said on X, formerly Twitter, on Thursday.
Ottawa missed opportunity to protect consumers, think-tank says
Freeland responded to Poilievre on the platform, saying that HSBC was leaving Canada.
“By blocking this, Pierre Poilievre would have risked 4,000 workers losing their jobs, investors losing faith in Canada as a place to do business, and 780,000 Canadians losing banking services. That’s not a serious position — it’s reckless & irresponsible.”
Keldon Bester, executive director of the Canadian Anti-Monopoly Project, said Ottawa missed an opportunity “to protect competition and affordability in the banking sector.”
“While commitments related to the financing of affordable housing appear positive, there is little in the way of protecting Canadian homeowners in a higher interest rate environment,” he said in a statement.
Chrystia Freeland’s approval was the last hurdle for the deal after the Competition Bureau approved it in September. (Nathan Denette/The Canadian Press)
Bester said that in approving the transaction, the government could have secured commitments to protect HSBC mortgage customers from price increases on renewal. Instead, he said it appeared Ottawa “settled on ensuring that HSBC customers are well-informed of their limited options going forward.”
Quinn said HSBC felt reassured by RBC that, as part of its long-term growth strategy, the Canadian bank would invest “in building out their own international capabilities to meet the needs of both our individual and corporate clients.”
“Canada is fortunate in that it has many strong banks operating in a highly competitive market,” he said.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
