(Toronto) Royal Bank of Canada President and CEO Dave McKay made some of his most impactful comments yet on the importance of the federal government approving the takeover of HSBC Canada by the bank for 13.5 billion, while the operation arouses growing opposition.
Speaking on a conference call to discuss the bank’s fourth-quarter results after reporting a profit rise, McKay argued that rejecting the deal would reflect badly on the country.
“It would be a very bad signal for foreign investors not to move forward in this direction, because we need to attract capital to this country,” he insisted.
“Everyone understands that HSBC is leaving, that they made the choice to leave, and that it would look horrible for Canada if you didn’t allow the free flow of capital. »
Her comments come after the House of Commons finance committee called on the finance minister in early November to block the deal, fearing it would harm competition, although Liberal MPs abstained during the vote.
Conservative Leader Pierre Poilievre also called in October for the deal to be blocked, noting the Competition Bureau’s conclusion that the bank was disrupting mortgage rates and that its loss could force Canadians to pay higher rates. higher.
A coalition of anti-monopoly, environmental and indigenous groups also launched a campaign on November 23 with the aim of ending the deal.
During Thursday’s conference call, Mr. McKay insisted that the deal was good for Canada, with higher taxes and dividends that would stay in the country, and that it had been studied in depth by the Competition Bureau, which gave it the green light.
“They demonstrated great diligence in an extensive process involving tens of thousands of documents. We must respect the process. And therefore, I remain confident given that everyone, at all levels, understands the benefits and why this is good for Canada, and why not doing it is very bad for Canada. »
The bank has already worked to prepare for the integration of the acquisition, reporting $203 million in related expenses in the fourth quarter.
This spending added three percentage points to the 13% growth in spending from the previous year.
Other expense drivers included severance pay as the company carried out announced layoffs at the end of the third quarter.
Compared to the end of the second quarter, Royal Bank has eliminated the positions of 3,000 full-time employees, or approximately 3.2% of its workforce.
The bank also increased its provision for credit losses to 720 million, from 381 million a year earlier, due to concerns over the macroeconomic environment.
The increase comes as McKay said an economic slowdown was already being observed. The indicators mean rate hikes are likely to be made although borrowers will still be under pressure, he said.
“Given easing price pressures, we believe central banks have reached the end of the tightening cycle and will turn to rate cuts in 2024, although rates are expected to remain above current levels. before the pandemic. »
His comments come as Statistics Canada reported Thursday that Canadian GDP fell 1.1% on an annualized basis in the third quarter.
Despite higher expenses and provisions, Royal Bank reported profit of $4.13 billion, or $2.90 per share, for the quarter ended Oct. 31, up from $3.88 billion, or $2.74 per share. action, a year earlier.
Revenue totaled 13.03 billion in the bank’s latest quarter, up from 12.57 billion in the same quarter last year, while the bank’s allowance for credit losses jumped to 720 million, up from 381 million a year earlier.
On an adjusted basis, Royal Bank earned $2.78 per share in its most recent quarter, unchanged from the same quarter last year.
Analysts on average had expected adjusted earnings of $2.62 per share, according to estimates compiled by financial data firm Refinitiv.
At the end of the conference, Mr. McKay highlighted the bank’s strong liquidity, its cost-cutting efforts and its desire to buy HSBC Canada.
“You can see the path forward to being able to absorb HSBC, continue to build capital, allocate capital for growth and start returning capital to shareholders in the near future. »
The bank also announced a dividend increase on Thursday. It will now pay a quarterly dividend of $1.38 per share, up 3 cents from $1.35.
