RBC’s deal to acquire HSBC will benefit Canada’s largest lender, but Canadians should have competition-related concerns, one portfolio manager says. 

On Friday, HSBC said it anticipates the sale of its Canadian operations to RBC to close in the first quarter of 2024 after the transaction received approval from Finance Minister Chrystia Freeland Thursday. 

Grant White, a portfolio manager and investment advisor at iA Private Wealth, said in an interview with BNN Bloomberg Friday that after clearing the final hurdle Thursday, the deal will see Canada’s largest lender acquire the seventh-largest lender in the country.

“As an RBC shareholder, I love the deal. As a Canadian, I think that we need to be very critical of competition in all of our industries,” White said. 

The Canadian banking sector in particular is heavily concentrated, he said, adding that competition works to improve prices. 

“We have seen that in HSBC, where they have been influential on especially mortgage lending rates and other areas like that. So there's certainly a concern that we are not seeing that,” White said.

“I think that the Canadian industry should be more open to new and innovative solutions. We have a tremendous amount of talent in this country with entrepreneurs and startups and I think that the banking sector is largely closed off to a lot of that today, the gates are too hard to break down.”

As a result, he said the government should look for ways to incentivize innovation in the financial services industry.

Carl De Souza, a senior vice-president of North American financial institutions at DBRS Morningstar, said in an interview with BNN Bloomberg Friday that the deal is not “hugely significant.” He said HSBC represents about a two per cent market share in the Canadian banking sector. 

However, De Souza added that from a client quality perspective, HSBC is a “very attractive” business. 

“So they're (HSBC) a little more heavily skewed to the commercial side but also have a good retail side with residential mortgages and both portfolios are of high quality,” he said. 

“I think when RBC looked at this book and at this bank, it's a rare opportunity for good quality assets that have performed well to increase your presence and market share in Canada.” 

INVESTING OUTLOOK

Going forward, White said investors should be realistic about the growth potential for Canadian bank stocks and added he doesn’t expect to see “massive gains” in share prices.

He said he will continue to hold shares of RBC and views it as a core holding. 

“But I think if you're looking for real growth, I'd still be looking (at) other places. I think we've seen the easy growth in this space,” White said.