Passersby outside the iconic HS小蓝视频 Bank Canada pendulum building at 885 West Georgia Street on Good Friday were able to witness workers in a crane covering HS小蓝视频 branding atop the structure.
It was part of one of the biggest banking takeovers in Canadian history.
Following Royal Bank of Canada’s (R小蓝视频) (TSX:RY) $13.5 billion deal to buy Vancouver-based HS小蓝视频 Bank Canada from London-based HS小蓝视频 Holdings plc (LON:HSBA), which closed at the end of March, an ambitious effort was underway to rebrand HS小蓝视频 branches with R小蓝视频 signage, or at least to cover HS小蓝视频 branding, and swap HS小蓝视频’s automatic teller machines (ATMs) with R小蓝视频 ones.
R小蓝视频 technicians put just as much – if not more – work into ensuring that customer accounts transitioned seamlessly.
“It has been a tremendous success in terms of execution,” R小蓝视频’s regional president for 小蓝视频, Martin Thibodeau, told BIV.
“As we reopened during the weekend, all the systems: the savings systems and the investments and the borrowings and the RSPs – all the different products and services, when we reopened the switches, the data were transferred.”
R小蓝视频 technicians had a maximum 16 months to prepare, from when the deal was agreed to in late November 2022 to the day Canada's largest domestic bank acquisition in history closed.
The only bigger transaction involving a Canadian bank would be Bank of Montreal's (BMO) (TSX:BMO) US$16.3 billion takeover of San Francisco's Bank of the West in 2023.
Quick rebrandings and changed ATMs are standard fare when banks combine operations, say banking analysts, and former board members, such as Carole Taylor, who is a former board member at HS小蓝视频 Bank Canada as well as its parent HS小蓝视频 Holdings plc, and at Toronto-Dominion Bank (TD) (TSX:TD).
“When I was on TD bank’s board, we had bought a big bank in New Jersey, and the plan there was that over a weekend, or overnight, all of the banks would be branded TD," she said, referring to the bank's US$8.5 billion transaction in 2008 to buy Commerce Bancorp.
“It was obviously an amazing task [for R小蓝视频] to do it over a weekend, and they seem to have done it without a hitch, which was incredible.”
The former HS小蓝视频 building at 885 West Georgia Street has R小蓝视频 branding at ground level and is awaiting new R小蓝视频 branding atop the structure | Rob Kruyt
Acquisition increases R小蓝视频’s 小蓝视频 presence
One commitment that helped secure federal approval for the transaction was Toronto-based R小蓝视频's promise to create a banking hub in Vancouver.
"That was to score political points," Mike Rizvanovic, managing Director, at KBW and an analyst who covers the Canadian banking sector, told BIV.
HS小蓝视频 Bank Canada had been based in Vancouver so there was political pressure to provide something for 小蓝视频, he explained.
The Conservative Party of Canada and its leader, Pierre Poilievre, had urged the government to reject the deal, so Finance Minister Chrystia Freeland had leeway to put strict conditions on how the deal could proceed.
The rebranding effort and the behind-the-scenes technology work are only part of R小蓝视频’s plan to create a bigger hub in 小蓝视频
That hub has two components.
First, big picture, R小蓝视频 has simply grown its operations in 小蓝视频 to be a larger part of its own operations because HS小蓝视频 Bank Canada's operations were disproportionally in 小蓝视频
More than one-third, or 44 of HS小蓝视频’s 128 Canadian branches, and approximately 1,000 of HS小蓝视频’s 4,600 employees were based in 小蓝视频
This means that R小蓝视频’s 小蓝视频 operations jumped to more than 8,500 workers in April from approximately 7,542 workers in March.
R小蓝视频 committed to keep open 33 of HS小蓝视频’s branches across Canada – a figure that included 10 branches in 小蓝视频, Thibodeau said.
On the transition weekend, R小蓝视频 permanently closed 15 HS小蓝视频 branches in 小蓝视频, while 19 小蓝视频-based HS小蓝视频 branches are set to permanently close in the next year or so, he added.
R小蓝视频 before the transaction had 170 branches in 小蓝视频, Thibodeau said.
That means that that the bank now operates 199 branches in 小蓝视频, and it has a plan to whittle that down to 180 branches within the year.
HS小蓝视频 branches that are near R小蓝视频 branches are most at risk of closing.
No former HS小蓝视频 staff have yet been let go, Thibodeau stressed.
He said R小蓝视频 committed to keep all customer-facing staff at branches employed. As a result, workers at closed HS小蓝视频 branches have moved to other locations.
About 400 of the HS小蓝视频 Bank Canada’s 4,600 former employees worked at its head office, and are not considered bank-branch employees, Thibodeau said.
Those workers will be offered positions at R小蓝视频, although some of those jobs may be in Toronto, he added.
It is possible, he said, that if employees are not willing to move, the bank will offer them termination packages.
Vancouver banking hub set to power R小蓝视频 infrastructure
What R小蓝视频 really committed to when it agreed to create a banking hub in Vancouver is something completely different than simply having a larger general R小蓝视频 workforce.
It committed to create a 1,000-worker banking division in Vancouver within five years.
R小蓝视频 workers from various cities across North America are set to relocate to Vancouver and be joined by a net total of 440 new workers to create this stand-alone hub.
“Hopefully we will do this sooner than five years,” Thibodeau said.
He said customers will not interact with workers in the banking hub. Instead, the hub’s workers will create software as well as security systems to prevent cyberattacks, and other core parts of R小蓝视频’s internal bank infrastructure.
“As you build more stuff, you need larger pipes,” he said of the need for the future banking hub's improved infrastructure.
“It's like a highway: you need to improve the highway and have more lanes.”
The increasing staff presence would get R小蓝视频 to more than 9,500 employees when the hub is fully activated, and Thibodeau said he is looking ahead to a staff count near the round number of 10,000.
That growth means R小蓝视频 has no plans to shed any of HS小蓝视频’s former real estate, Thibodeau said.
The former HS小蓝视频 Bank Canada headquarters on West Georgia Street now has R小蓝视频 branding | Glen Korstrom
Helping finance affordable housing is part of the deal
Another of Freeland’s conditions, when she approved R小蓝视频’s takeover of HS小蓝视频 Bank Canada, was that the bank provide $7 billion in financing for affordable-housing construction across Canada, or enough capital for developers to build 25,000 new homes.
R小蓝视频 plans to allot about $2 billion of that capital to be lent to developers in 小蓝视频
Thibodeau said that by spending $13.5 billion to buy HS小蓝视频 Bank Canada, the bank acquired an extra $200 billion worth of capital, in that bank’s assets, which it is now able to lend.
“We are working in collaboration with the province, and of course, our developers,” he said. “In the past, we might have been limited with the dollars that we had just for real estate. Now we have [more capital.]”
He added that governments do not start projects on their own, and that developers are a vital piece of the puzzle.
“You need a government that makes it easy, and a city that allows the market to build,” he said.
Some service changes impact customers
Before R小蓝视频 acquired HS小蓝视频 Bank Canada, HS小蓝视频’s customers were able to use that bank’s own ATM machines free of charge as well as all ATMs owned by any of 小蓝视频’s 36 credit unions, without a fee for simple withdrawals.
Thibodeau estimated that R小蓝视频 has about 600 ATMs in 小蓝视频 because many of its ATMs are stand-alone kiosks outside bank branches.
That, he said, is a much larger network of fee-free ATMs than HS小蓝视频 customers would have previously had access.
Another change that will impact some former HS小蓝视频 customers is that the combined bank will have fewer currency options for savings and chequing accounts.
HS小蓝视频 offered bank accounts in 10 different currencies. R小蓝视频 has recently expanded the number of currencies in which it enables customers to bank.
R小蓝视频 has long allowed customers to have bank accounts denominated in Canadian and in U.S. dollars. It recently added options to bank in U.K. pounds, Euros and Hong Kong dollars, Thibodeau said.
The other currencies in which HS小蓝视频 Bank Canada offered banking services were little used and costly to provide, he added.
Rizvanovic said he was impressed with R小蓝视频's move to include more currencies for customers conduct banking.
"That is a very wide breadth of offering when you're talking about five different currencies," he said. "I would not expect that at any of the other big six banks."
HS小蓝视频 Bank Canada was known for having mortgage rates that were slightly lower than other banks, Rizvanovic said.
R小蓝视频 will "absolutely not" continue to match what those rates were, he said.
"That competitive dynamic is now gone," Rizvanovic added.
Significant bank consolidation in Canada unlikely
Thibodeau told BIV that his bank has no plans to acquire other competitors in the Canadian market.
“If we do other acquisitions, it will be south of the border, or the U.K.” he said.
That may be because buying another Canadian bank would attract strong opposition, and calls that R小蓝视频 is getting so big that it could gouge customers.
"I have a better chance of getting hit by lightning than seeing the big six banks consolidate with each other," Rizvanovic said.
Indeed, former prime minister Paul Martin, when he was finance minister in 1998, blocked a pair of proposed bank mega-mergers: R小蓝视频 with BMO, and TD with Canadian Imperial Bank of Commerce (TSX:CI小蓝视频).
His rationale at the time was that those mergers would lead to significantly less bank competition for consumers.
The Competition Bureau in September approved R小蓝视频's HS小蓝视频 takeover because it found that the combination would not significantly lessen competition.
A 2023 Barclays report pinned R小蓝视频's share of overall domestic deposits at 22 per cent, while its share of domestic lending was 21 per cent.
HS小蓝视频 Bank Canada, on those metrics, held a market share between two and three per cent, according to Barclays.
That meant a combined R小蓝视频-HS小蓝视频 Bank Canada would have far less than a 35-per-cent share of the banking business, which is a threshold widely seen as a level that would limit competition.
Smaller bank transactions, however, have taken place in recent years.
Smith Financial Corp. last year bought mortgage provider Home Capital Group Inc. in a transaction that valued Home Capital at $1.7 billion.
Laurentian Bank (TSX: ) in April that it agreed to sell assets under administration of its Laurentian Bank Securities retail full-service investment broker division to iA Private Wealth Inc., part of iA Financial Group.
That transaction included the transfer of approximately $2 billion in assets under administration.
