Royal Bank Of Canada · TSX:RY
Royal Bank Of Canada — Merger or Acquisition (November 2022)
24 slides from Royal Bank Of Canada's merger presentation, Nov 29, 2022
Slide 1: Royal Bank of Canada to acquire HSBC Canada
Royal Bank of Canada to acquire HSBC Canada Strategic expansion of our premium Canadian business November 29, 2022 All amounts are in Canadian dollars unless otherwise indicated
Slide 2: Caution regarding forward looking information
Caution regarding forward looking information This presentation contains forward-looking statements within the meaning of certain securities laws, including the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legi
Slide 3: Strategic Overview
Strategic Overview Dave McKay President and Chief Executive Officer
Slide 4: Strategic expansion of our premium Canadian business
Strategic expansion of our premium Canadian business Positions RBC as the bank of choice for newcomers and commercial clients with international needs Enhanced value Well-positioned to serve affluent clients who need global banking and wealth management capabilities proposition across a wider
Slide 5: HSBC Canada: A well-established, premier personal and commercial bank
HSBC Canada: A well-established, premier personal and commercial bank Overview Key Metrics(2) Operating in Canada since 1981 Well-diversified balance sheet Strong commercial banking capabilities $134BN $76BN $82BN Affluent and globally-connected clients Total Assets Net Loans Deposits Well-d
Slide 6: Leveraging broader set of products and capabilities across a wider customer base
Leveraging broader set of products and capabilities across a wider customer base Percent of clients with transaction, Complementary capabilities allowing for investments, borrowing & card products(1) potential cross-sell opportunities > 2x 19% Canada 11% SME(2) Products and 8% Relationship Managers
Slide 7: Accretive deployment of capital to create shareholder value
Accretive deployment of capital to create shareholder value Accretive use of capital Significant earnings generation 6% 14% $1.4BN 27% Marginal Return on 2024E EPS Accretion Internal Rate 2024E Fully Synergized Tangible Common (consensus)(1) of Return(2) NIAT(3) Equity(5) 9.4x 2024E Fully Synergized
Slide 8: Recent acquisitions have expanded our affluent and HNW client franchises
Recent acquisitions have expanded our affluent and HNW client franchises Canada Premier U.S. private and commercial Top 3 provider of discretionary wealth Premier Canadian commercial bank with bank with wealth management management in the UK and Ireland affluent client base capabilities Acquired in
Slide 9: HSBC Canada: A strong cultural fit with shared values and focus on sustainability
HSBC Canada: A strong cultural fit with shared values and focus on sustainability Best 50 Corporate Citizens Excellence in Governance Canada Diversity, Equity and Inclusion Corporate Knights(1) Governance Professionals of Canada(1) A diverse and inclusive organization 67% 44% 11% Women in executive
Slide 10: Retail and Business Banking
Retail and Business Banking Neil McLaughlin Group Head, Personal & Commercial Banking
Slide 11: HSBC Canada: Leading bank of choice for newcomers and globally connected clients
HSBC Canada: Leading bank of choice for newcomers and globally connected clients Attractive Retail Franchise with High Quality Retail Clients Globally Connected Clients Premium Clients Retail Lending Largely urban-based with a focus Positions RBC to be the bank of on affluent clients choice for newc
Slide 12: HSBC Canada: Provides differentiated commercial banking capabilities
HSBC Canada: Provides differentiated commercial banking capabilities Strong Business Banking High Quality Commercial Clients Globally Connected Clients Capabilities(1)(2) Well-diversified business loan Strong connectivity with Positions RBC to be the bank of portfolio relationship managers choice fo
Slide 13: Financial Review
Financial Review Nadine Ahn Chief Financial Officer
Slide 14: Transaction overview
Transaction overview RBC to acquire 100% of the common shares of HSBC Canada for $13.5 billion in cash Key Financial RBC will purchase at par HSBC Canada’s outstanding preferred shares and subordinated debt held by HSBC Terms and Structure HSBC Canada’s earnings from June 30, 2022 through clos
Slide 15: Compelling opportunity to drive significant expense synergies
Compelling opportunity to drive significant expense synergies Contained integration risk Highly achievable expense synergies $740MM of estimated expense synergies In-market transaction with significant footprint overlap 55% of HSBC Canada’s estimated 2024E non-interest expense base Fully phase
Slide 16: HSBC Canada: A well-established risk management program and mature risk culture
HSBC Canada: A well-established risk management program and mature risk culture Robust due diligence process High Quality Lending Portfolios(1) Interviews with HSBC Canada Well-Diversified Business Portfolio Prime Residential Lending Portfolio management Attractive client base weighted towards large
Slide 17: Strategic expansion of our premium Canadian business
Strategic expansion of our premium Canadian business Positions RBC as the bank of choice for newcomers and commercial clients with international needs Enhanced value Well-positioned to serve affluent clients who need global banking and wealth management capabilities proposition across a wider
Slide 18: Appendix
Appendix
Slide 19: Pro forma earnings profile
Pro forma earnings profile 2024E Fully Phased-In Expense Synergies (1) Including Estimated Purchase Before Estimated Purchase HSBC Canada ($MM) Accounting Impacts Accounting Impacts Revenue Net of Provisions for Credit Losses $2,629 $2,629 Non-Interest Expenses (1,340) (1,340) Net Income Before-Tax
Slide 20: HSBC Canada: Strong funding profile supports organic loan growth
HSBC Canada: Strong funding profile supports organic loan growth Loans by Geography Deposits by Type Loan-to-Deposit Ratio British 99% Columbia Term 96% 94% 93% 34% 32% Demand 29% 85% Prairies 12% $76BN $82BN Quebec Ontario 9% 40% Others Current Accounts: 5% Non-Interest Current Accounts: Bearing In
Slide 21: Additional Notes
Additional Notes Slide 5 1. PCL ratio is calculated as total provision for credit losses as a percentage of average net loans and acceptances. Slide 6 2. Canadian Financial Monitor by Ipsos – approx. 20,700 Canadian individuals – data based on Peer Group results for the 12-month period ending July 2
Slide 22: Glossary (1/2)
Glossary (1/2) Assets under management (AUM): Assets managed by HSBC Canada, which are beneficially owned by clients. Services provided in respect of assets under management include the selection of investments and the provision of investment advice. Common equity tier 1 (CET1) capital (under OSFI
Slide 23: Glossary (2/2)
Glossary (2/2) Loan-to-Deposit Ratio: Total Net loans divided by total customer accounts (deposits). Net Stable Funding Ratio The ratio of available stable funding to required stable funding over a one-year time horizon, assuming a stressed scenario. Available stable funding would include items
Slide 24: Note to users
Note to users We use a variety of financial measures to evaluate our performance and the impact of the proposed transaction as described herein. In this document we use certain key performance and non-GAAP measures, including forward-looking non-GAAP measures, that we believe provide useful informat
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