Gloria Nieto/The Globe and Mail
So much for all the rumours. Royal Bank of Canada won't be buying a personal and commercial bank in the United States any time soon.
"We are not interested in [U.S.] mass market banking through a bricks and mortar model," RBC president and incoming chief executive officer Dave McKay said on the bank's quarterly conference call.
Mr. McKay's comments were unprompted and came as part of his prepared remarks, meaning the message was one he wanted to make sure analysts and investors heard loud and clear.
Speculation has been growing over the past twelve months that RBC would consider buying a U.S. personal and commercial bank, even though the Canadian lender sold its old U.S. P&C operation just a few years ago.
Developing a footprint in U.S. personal banking is a potential area for RBC's future growth, and Mr. McKay previously led the bank's Canadian P&C arm, making him the ideal CEO to buy a bank in his wheelhouse.
Although a P&C deal is now off the table, RBC is still interested in expanding in the U.S. It's just that any growth is likely to come from wealth management or capital markets. The bank is keen on expanding its corporate loan book as well as providing lending and deposit services through its U.S. wealth management arm.
Mr. McKay did not elaborate on his decision making process, but the U.S. personal banking market isn't a very lucrative one at the moment. Mortgage growth has slowed substantially, and banks face stiff competition for the best lending clients, forcing them to slash their pricing models just to win business.
Royal Bank of Scotland has been looking for a buyer for Citizens Bank, its U.S. personal and commercial banking unit, but couldn't find any buyers, forcing the U.K. bank to start unloading the business by way of an initial public offering. And when Toronto-Dominion Bank reported earnings Thursday, chief financial officer Colleen Johnston did not hold back when discussing the market south of the border. Although the lender's U.S. arm had encouraging results, "the U.S. operating environment for banks is quite tough right now," she said in an interview.
RBC also discussed the prospects for a wealth management acquisition, either in Canada or abroad, and group head George Lewis made it clear the bank is being selective.
"We continue to be interested in acquisitions in the asset management area," he said. But after buying Phillips, Hager & North in 2008 and BlueBay Asset Management in 2010, RBC feels as though they've already had two big wealth management wins, and can afford be choosey.
"We've gone 2-for-2, and we're much more interested in going 3-for-3 instead of 5 out of 10," he said.
Tim Kiladze