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2023 Mercedes EQE and 2024 AMG EQE SUVs

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Mercedes‘ new electric SUVs are here to push the barriers of luxury and performance.

Mercedes is here to bless your Sunday with two gorgeous new machines for the future, the 2023 EQE and the 2024 AMG EQE SUVs. And yes, that latter name means Merc is giving us an electrified performance machine.

Let’s start with the EQE SUV. This will be the fourth EQ model from Mercedes, and according to the company, it’s actually a little more compact than the EQE sedan, with a 119.3-inch wheelbase clocking in at 3.5-inches shorter than the sedan. It has a sporty look to it, though, so you can feel at ease if you ever have to take it over a slightly rougher road.

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One of the more interesting features Mercedes mentions is the fact that it can manage its battery software with over-the-air updates in order to remotely improve battery function well after you’ve bought the car. No, that’s not exactly a novel feature for EVs, but Mercedes has refined its technology to keep it feeling modern as EV tech rapidly progresses.

Further, Merc highlights its “navigation with electric intelligence,” which basically just means that it can calculate the fastest route that also takes into account charging stops based on variables, like traffic or changes in your driving style.

We’ve saved the best for last with the 2024 AMG EQE SUV. This is the German automaker’s first-ever all-electric SUV from its performance line, and Mercedes is calling it its “most versatile electric vehicle” thanks to its balance of performance and space.

Mercedes also highlights something it’s calling the “AMG Sound Experience,” which seems like one of those vague phrases that means it’ll have its own suite of EV-style noises to complement a banging sound system.

All that said, we’re still waiting on more details from Mercedes. All photos in this article show off the European model, and we don’t have exact dates on release. We also have no word on pricing, but Merc’s other EQ offerings run from around $50,000 to north of $100,000.

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How RBC pulled off its highly-coveted $13.5-billion deal for HSBC Canada — with some unintended help from Ottawa

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A combination of external and internal factors made RBC’s HSBC deal a reality.Duane Cole/The Globe and Mail

He’ll never want to admit it, but Royal Bank of Canada RY-T chief executive Dave McKay can thank Prime Minister Justin Trudeau, at least in part, for landing Canada’s most coveted bank deal in decades.

Like many of his industry peers, Mr. McKay has been frustrated with Ottawa for slapping an additional, permanent tax on bank and life insurance company profits in the most recent federal budget, something Ottawa has attributed to clawing back some of the financial relief it provided during the COVID-19 pandemic.

While the federal government can taketh away, it can also provide, and seven months later, another pandemic financial policy has proven to be quite helpful to RBC – even if the assistance is unintended.

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Because there was so much economic uncertainty when Canada entered its first COVID-19 lockdowns in March, 2020, the federal government and the country’s banking regulator wanted banks to preserve cash as a buffer against any shocks. To enforce this, they prevented the lenders from hiking their dividends, something they often did annually.

There was no way to know it then, but Canada’s banks kept churning out profits, even through multiple lockdowns. That meant all the cash they would have normally put toward dividend hikes piled up on their balance sheets.

RBC wasn’t the only lender that saw its coffers swell, but because it is Canada’s largest bank by profit, it was able to hoard large amounts each quarter. Ultimately, that money was deployed to win the HSBC Canada auction, in the form of a $13.5-billion, all-cash bid.

At the same time, HSBC Canada’s parent, London-based HSBC Holdings PLC, must have seen all that money piling up. So, even though HSBC’s global management team had long said it was committed to Canada, if there was any time to sell, this was it. All that excess cash gave HSBC a greater chance of selling for top dollar – and, crucially, an exit before any potential recession.

The second element of RBC’s winning strategy, and arguably the most important, is an internal one, and it is rooted in something so often overlooked in business: discipline.

Ever since Mr. McKay acquired California-based City National Corp., which specializes in banking for high-net-worth clients, for US$5.4-billion in 2015, just five months into his tenure, there have been endless questions from investors and analysts about what RBC would do next. Often, they centred on growth in the United States.

Mr. McKay has been batting these away for years, suggesting RBC isn’t all that interested in establishing a large retail banking footprint in the U.S. Doing so requires scale, which means it would take one or two large deals to make an impact. To his mind, it just isn’t worth it, considering where RBC is starting from, and because retail banking isn’t as profitable in the U.S. as it is in Canada.

But the questions kept coming, especially as the Big Six banks started accumulated gobs of cash during the pandemic. Then two of RBC’s Canadian rivals, Toronto-Dominion Bank and Bank of Montreal, splurged on deals of their own. Late last year, BMO bought California-based Bank of the West for $17.1-billion, the largest U.S. deal in Canadian banking history, and early this year TD bought First Horizon for US$13.4-billion.

Standing pat is incredibly tough when rivals are writing big cheques. The fear of missing out is real, and investors tend to be myopic, too, so they have a habit of rewarding short-term revenue growth.

RBC, though, never wavered. “Patience is really important,” Mr. McKay said on a conference call with reporters Tuesday.

Royal Bank wasn’t necessarily waiting for this precise opportunity. “We didn’t know [the HSBC Canada sale] was going to happen, or the timing,” he said. But sometimes executives get lucky. And having all that excess capital allowed RBC to splurge on what Mr. McKay called a “more sure-footed transaction” relative to rivals’ deals.

He didn’t go into specifics, but based on its financials, Bank of the West is a fixer-upper for BMO. It is also based in a state where BMO has almost no footprint. First Horizon, meanwhile, may not have even been TD CEO’s first choice for its most recent U.S. retail banking deal, after TD was reported to be in the auction for Bank of the West just a few months prior. HSBC, by contrast, is a very profitable bank, with a 14-per-cent return on equity over the past 12 months, rather healthy by global standards.

What RBC will have to prove now is that it hasn’t overpaid. Just because it had the cash to burn doesn’t mean it needs to use it all.

The bank’s executives are stressing that after making some adjustments, it’s paying about nine times HSBC Canada’s forward earnings, which is below the long-term average trading multiple for Canadian lenders. However, bank deals are also priced off of a multiple of the target’s book value, and at 2.5 times HSBC Canada’s, RBC is paying a healthy premium.

That isn’t necessarily a bad thing. In fact, during Mr. McKay’s tenure, it’s become a bit of a standard. When RBC bought City National, it paid 2.6 times book value, and at the time, almost everyone on Bay Street wondered if the bank overpaid. All those fears have subsided over the past seven years.

What’s become clear is that RBC is willing to pay up for quality. Some bankers chase cheap assets, and may get lucky and find a diamond in the rough. RBC, though, has tried that before, and it resulted in a disastrous acquisition of North Carolina-based Centura Banks Inc. in 2001. Unwinding the deal took a decade, and when RBC ultimately sold the division in 2012, it took a $1.5-billion charge in the process.

“We bought a franchise that had to be transformed and changed – it wasn’t the ‘Tier 1′ franchise,” Mr. McKay said about Centura in a 2015 interview with The Globe and Mail. “Our biggest [lesson] from that failed venture was that you have to buy the highest-quality franchise and build on it.” Sound familiar?

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Royal Bank of Canada to buy HSBC Bank Canada for $13.5 billion – Financial Post

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Deal is expected to close by late 2023

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Royal Bank of Canada has entered an agreement to buy HSBC Holdings PLC’s Canadian business in a $13.5-billion cash deal that will pad RBC’s lead as Canada’s largest bank, assuming regulators give the transaction the green light.

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As part of the deal, which is slated to close by late 2023, RBC will acquire all of HSBC Canada’s shares at a price that works out to 9.4 times the unit’s adjusted 2024 earnings of $1.4 billion, RBC said.

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The bank projects the deal will lead to $740 million in annualized pre-tax synergies, while RBC will foot roughly $1.4 billion in total acquisition and integration costs. All of HSBC Canada’s earnings from June 30 will accrue to RBC.

HSBC Canada had $134 billion in assets as of Sept. 30 and has approximately 130 branches and 4,200 employees. Its banking segment holds about two per cent of Canadian deposits and mortgages.

“(HSBC Canada) is a fantastic franchise that operates in our home market in businesses that we are very good at, while also adding complementary products and a differentiated client base,” RBC president and chief executive officer Dave McKay said during an analyst call following the announcement.

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“It’s also a strong cultural fit for both our clients and employees,” McKay added. “The transaction is financially compelling as it also creates immediate value for the strategic deployment of excess capital, highly achievable expense savings, and a well-understood revenue cross-sell opportunity.”

During the call, McKay said 50 per cent of HSBC Canada’s commercial banking clients were “globally connected” and that the transaction thus positioned RBC to be the “bank of choice” for clients with international banking and wealth management needs, as well as for newcomers to Canada.

Neil McLaughlin, RBC’s group head of personal and commercial banking, said they would be working with HSBC Canada to ensure access to HSBC’s global platform would be maintained.

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“At the bottom line, we are committed to make sure that conveniences that our customers have now, and value propositions that they’re used to, remain,” he said.

RBC estimates that the transaction will add six per cent to earnings per share in 2024, as well as provide a 14 per cent internal rate of return. The deal comes eight months after RBC acquired U.K.-based Brewin Dolphin Holdings Plc. For $2.6 billion in cash in March.

“I am pleased that we have reached an agreement with RBC,” said HSBC Group chief executive officer Noel Quinn in a press release. “The deal makes strategic sense for both parties, and RBC will take the business to the next level. We look forward to working closely with RBC’s leadership team to ensure a smooth transition for our clients and colleagues.”

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Linda Seymour, president and chief executive officer at HSBC Canada, said in a LinkedIn post that there will be no change for now with the company’s operations. In a note to customers, HSBC Canada noted there would be a transition period spanning several months as the businesses converge.

HSBC Holdings PLC is expected to record a US$5.7 billion pre-tax gain as a result of the deal.

One issue that could stand in the way of a seamless transaction is competition concerns, said National Bank of Canada analyst Gabriel Dechaine, who also noted the purchase price was about 30 per cent greater than his team expected.

“The transaction is, of course, subject to regulatory approvals,” Dechaine said in a Nov. 29 note. “A big question facing (RBC)’s pursuit of HSBC Canada is feedback from the Competition Bureau. We estimate (RBC) will be increasing its current 21 per cent domestic market share in loans and deposits by about 200 (basis points) each.”

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Dechaine doesn’t expect RBC will have to issue shares to cover the transaction, given its substantial excess capital.

John Aiken, senior analyst and head of research at Barclays Bank PLC, called the transaction a “once in a generation acquisition in Canadian retail banking” as it brings significant upside to RBC’s earnings and profitability.

“The only fly in the ointment is that, as the largest player, there could be some regulatory concerns with the Competition Bureau,” Aiken wrote. “While we believe that the deal will ultimately be approved, there is a risk that it may not ultimately be consummated in its current form.”

Aiken added that he expects the earnings accrual to RBC to negate any impact that a regulator delay may bring.

RBC’s robust capital position had made the bank Bay Street’s most likely candidate to win the bidding for HSBC Canada, even though all of the Big Six reportedly looked under the hood when the U.K.-based financial services giant put the unit up for sale.

RBC shares traded flat Tuesday morning following the announcement.

• Email: shughes@postmedia.com | Twitter:

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Oil Prices Jump On Major Crude Draw – OilPrice.com

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Russia’s Pipeline Oil Exports To China Flat So Far This Year | OilPrice.com

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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Russia’s pipeline oil exports to China via the Eastern Siberia—Pacific Ocean (ESPO) oil pipeline were flat between January and October compared to the same period of 2021, according to China National Petroleum Corporation’s (CNPC) Vice President Huang Yongzhang.

Russia sent 33.26 million tons of oil to China via pipeline in the first ten months of this year, Huang was quoted as saying by Russian news agency TASS at a Russia-China energy forum.

While pipeline oil deliveries were basically unchanged this year, China has significantly increased its seaborne imports of Russian crude as Beijing and India have now emerged as the top buyers of Russian oil after the Russian invasion of Ukraine, as Western buyers shun Russia’s crude and prepare for the EU embargo on imports of Russian oil as of December 5.

Just ahead of the ban and the G7-EU price cap on Russian oil, some Chinese buyers have been hesitant to purchase Russian cargoes, as they wait for details on how the price cap would be enforced.  

Yet, both China and India are now demanding huge discounts for the Russian oil they are willing to buy, Bloomberg oil strategist Julian Lee wrote in a recent analysis.

Currently, China and India account for around two-thirds of Russia’s crude oil exports by sea, and the Asian buyers are exercising the negotiating power they have over Russia, Lee notes. If Russia wants to continue selling its oil to its new top customers, it must contend with the deep discounts the two buyers demand.  

As of the end of last week, Russia’s flagship crude grade, Urals, traded at $52 per barrel—a $33.28 discount to Brent Crude. This compares with the 2021 average discount of Urals to Brent of $2.85.

The huge discount costs the Kremlin some $4 billion in lost revenues every month, according to estimates from Bloomberg’s Lee. 

By Tsvetana Paraskova for Oilprice.com 

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