STORY: HSBC has agreed to sell its Canadian business to Royal Bank of Canada for around $10 billion in cash.
It paves the way for a potential bumper payout for shareholders further down the line.
HSBC once billed itself as the world’s local bank, building a global network of retail branches.
But in recent years it’s been cutting those back in a bid to improve profits.
The lender made the move in a bid to boost returns, following pressure from its biggest shareholder, Ping An Insurance Group.
The sale is expected to net HSBC a $5.7 billion pre-tax gain.
The firm said it may return some of the proceeds to shareholders via a one-off dividend or buyback after the deal has closed.
One analyst told Reuters that could go some way towards appeasing shareholders who were incensed by the bank curtailing dividends in 2020.
HSBC shares were up over 4% following the announcement, far outperforming the FTSE index.
The purchase will enable RBC to take market share in its home country, adding 130 branches and more than 780,000 retail and commercial customers.
If successful it will be the first big banking merger in a decade in Canada.