Royal Bank of Canada chief executive Dave McKay says he is eager for his bank’s takeover of HSBC’s Canadian operations to close so they can begin an integration that he expects will lead to significant cost savings.

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'We can't wait to close this': HSBC takeover will bring significant cost savings, says RBC chief Back to video

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The bank CEO said the deal, which is expected to close in this quarter, is on track to save the company $740 million on costs, which works out to about 55 per cent of HSBC Canada’s overall cost base. He said this figure will firm up in coming weeks as the companies get locked in on the closing date.

“Creating a global centre of business in Vancouver was really important to us because we’re looking at consolidating work from the U.S. into Canada to save on costs,” McKay told a bank CEO conference held by RBC Capital Markets on Jan. 9.

California, in particular, can be expensive and challenging to hire bank employees, he said.

The deal to buy HSBC Canada, first announced in November 2022, represents the largest acquisition in Royal Bank’s history, and will expand its domestic operations with HSBC’s $120 billion in assets, including wealth management, personal and commercial banking. HSBC Canada is also known for its low-mortgage rate offerings, and questions about whether they will survive in the wake of the acquisition remain.

While regulatory approval of the transaction was delayed, RBC now “can’t wait to close this and get on with it,” McKay said, calling the deal good for Canada, HSBC employees and HSBC clients.

The CEO said the difference between this takeover and previous mergers is that both the operating close and financial close will occur on the same day.

This means HSBC Canada’s technology will be migrated onto RBC’s platforms on the day of the financial close, as opposed to most transactions where the ownership of the technology is taken on financial close and only migrated when ready. McKay noted that “everything will occur on one weekend.”

He said HSBC clients and employees will be brought into RBC’s fold in the coming months, which he added was beneficial to Royal Bank’s overall investment thesis, profitability and scale.

HSBC’s capabilities on trade and finance, multi-currency accounts and global view of overall banking structure are now going to be on the RBC tech stack and will be offered to all 15 million of RBC’s consumer, commercial and corporate clients, McKay said.

“If you think about how complementary these two businesses, which create, at the end of the day, this very strong cross-border global consumer and commercial offering in Canada that’s offered to all Canadians, that’s where the investment thesis gets really exciting for us,” he said.

McKay was not the only chief executive to tout the cost savings from a recent acquisition at Tuesday’s conference.

Bank of Montreal chief executive Darryl White said BMO is expecting a “significant” expense reduction from its acquisition of Bank of the West last year, with savings almost 20 per cent higher than the original estimate.

White said BMO has upped its synergies target on the Bank of the West from US$670 million to US$800 million, an increase he described as “pretty much locked and loaded.”

“We’re gonna have that done by the end of the first quarter. That’s three weeks from now,” he said.

• Email: dpaglinawan@postmedia.com

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