BUSINESS
09/20/2011 12:28 EDT | Updated 11/20/2011 05:12 EST

National Bank buys HSBC Canadian investment advisory business for $206 million

MONTREAL - National Bank of Canada (TSX:NA) is bolstering its wealth management business with a deal to buy the Canadian full service investment advisory business of HSBC for $206 million in cash.

The Montreal-based bank said Tuesday that the price tag is for the HSBC business, while it has also set aside an additional amount to help retain HSBC Securities investment advisers.

"Through this acquisition, we are reaffirming our commitment to grow our wealth management distribution network across Canada," National Bank president and chief executive Louis Vachon said in a statement.

HSBC Securities has $14.2 billion of assets under administration, managed by over 120 investment advisers in 27 offices across Canada.

Vancouver-based HSBC Bank Canada is Canada's biggest foreign-owned bank with about 8,000 employees and over 140 bank branches.

The HSBC deal follows of the heels of National Bank's acquisition of Wellington West Holdings Inc., a Winnipeg-based investment dealer active in the energy and mining sectors, for $273 million earlier this year.

National Bank, Canada's sixth-largest bank, also recently acquired three loan portfolios consisting mostly of insured mortgages from banks in the United States and Europe along with an Asian organization.

Once the HSBC deal closes, National Bank Financial will have approximately $80 billion in assets under administration across Canada and over 1,060 investment advisers.

"With the additions of the full service investment advisory business of HSBC Securities and Wellington West, we are demonstrating our strong commitment to serving the wealth management needs of investors in every community across Canada," said Luc Paiement, executive vice-president of wealth management as well as co-president and co-CEO of National Bank Financial.

"With the integration of Wellington West well in hand, we expect a seamless transition of HSBC Securities full service investment advisory business on to National Bank's operations platform, where most of these assets are already held."

The addition of the HSBC business is expected to add about $100 million in annual revenue.

National Bank Financial, which includes the bank's retail advisory and brokerage business as well as its investment banking and corporate finance arm, accounted for about $1 billion in annual revenue, roughly a quarter of the bank's overall revenue.

As part of the agreement, HSBC Bank Canada will refer clients with non-discretionary full service investment advisory needs to National Bank and the two banks will co-operate to serve the needs of mutual clients.

"The sale of the business is in line with the strategy announced in May 2011 and the proceeds will be reinvested to grow the businesses of the Canadian bank which are fully aligned with our strategy," HSBC said in a statement.

The deal, which is subject to regulatory review and approval, is expected to close before the end of the year.

The HSBC acquisition is expected to increase National Bank's 2012 and 2013 recurring earnings per share by three to five cents.

HSBC Canada's corporate parent announced last month that it would cut 30,000 jobs worldwide by 2013 and sell almost half its U.S. retail bank branches.

National Bank shares were up 94 cents at $69.68 in trading on the Toronto Stock Exchange on Tuesday afternoon.