RBC struggling to find wealth manager that fits the bill

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Royal Bank of Canada has done its homework on a slew of asset management acquisitions, but the bank isn't having any luck when it comes to inking a deal.

"We've looked at a tremendous number of opportunities in the wealth management space in the last year or so, and the ability to execute is more challenging than the stated opportunities," chief executive officer Gordon Nixon said on a conference call Wednesday.

The big problem: available asset managers are incredibly expensive, with sellers demanding "extremely high valuations." Those that are affordable and fit into RBC's strategy just don't have strong businesses.

RBC's management team is extremely cautious about overpaying for a bad asset. While they acknowledge that they're willing to pay a full price when necessary, which they did with the $1.5-billion acquisition of BlueBay Asset Management, the target's underlying business has to be worth the money.

"While there are assets available, it's very difficult to make them work," Mr. Nixon said.

Because RBC is sitting tight for now, the bank is building up a lot of excess capital. Canada's banking regulator requires the Big Six lenders to hold common equity amounting to at least 8 per cent of their risk-weighted assets, and RBC's ratio is now well above the minimum at 9.7 per cent.

Because the bank has so much capital, it's easy to assume that management will ink a deal some time soon. Mr. Nixon stressed that isn't necessarily the case. "I wouldn't read that into it, by any means," he said.

"I don't want to sound overly conservative at this point in time, but in an environment like this you'd rather run with a higher capital position," he said.

RBC isn't the only lender that feels this way. On Tuesday National Bank of Canada said it will devote more time to building up its common equity capital ratio, to bring the bank in line with its peers who all have ratios above 9 per cent.