Royal Bank of Canada stunned the country in 2001 by naming Gordon Nixon, a 44-year-old investment banker, as its chief executive officer. Not only was he young for the job, but Nixon had no connection to personal and commercial banking, the division that dominates profits. But after 13 years, a run that saw him restructure the bank and also survive the financial crisis, P&C's bottom line has more than tripled and Canada's biggest bank now posts quarterly profits of $2-billion or more. Nixon retires this summer.
When you were named CEO, did you feel the media blew up the issue of your background?
There were valid questions, partially because there was not a great history of executives coming out of the investment banking business.
During your first three years, people wrote seriously critical things about you and RBC. Did you feel the heat?
I wish I'd acted quicker in terms of some of those changes. [In 2004, Nixon let go three senior executives and some 1,700 staff, mostly managers.] But rushing into wrong decisions is worse than delaying what is a right decision. Over 13 years, you go through periods where everybody loves what the bank is doing, and you go through periods where people don't. You come to realize that you don't get overly excited when the news is wonderful, and you don't get overly down when the news is the other way.
Leading up to the crisis, was it hard to handle people who said you needed to expand?
The easiest thing to do, as a bank, is to grow assets. We could have made any acquisition we wanted to; we could have grown our loan book dramatically. The market was paying for revenue growth rather than earnings growth. We took some heat in the marketplace, and from the media even more so. It's a lot sexier to see banks that are getting bigger. The pinnacle of that, of course, was the ABN AMRO acquisition, where you had Royal Bank of Scotland and Barclays fighting. It was an absolute disaster.
Are you still wary of M&A?
If you look at the most successful investments, nine out of 10 have come from investing back in our business. If I had my druthers, I'd put all our capital into growing our existing operations because they're very high-return. Contrast that with M&A, where you're paying a premium. You can only generate so much from synergies. Bank CEOs often develop a prime ministerial voice because they have to express confidence everywhere from branches to TV interviews.
Did it come naturally?
I came from a business that was much more homogeneous in terms of its people and their backgrounds. All of a sudden you're leading an organization with employees who have very different backgrounds, very different compensation structures. Being able to go out and to connect and to make people comfortable in the branch network, to me that was way more intimidating than standing in front of investment bankers.
How did you and your family handle the workload?
I'm not sure many CEOs are that much more challenged than other vocations. The biggest challenge from a family perspective was the bank was always front-and-centre; CEOs cannot leave their job at the office. The other thing is your schedule is so predetermined. I can look at my calendar a year ahead, and every month and every week there are things filled in.
Who did you turn to for support and advice?
When people say it's lonely at the top, there is some truth to that. Early on, there were certainly board members I was able to lean on. When I first came in, it wasn't my management team–back then it was much more guarded and confrontational. Today we're much more cohesive.
Will we see Canadian banks look much more like international institutions than they do today?
Ultimately, if we got to a profit split of 50 per cent Canada, 50 per cent non-Canada, that would be a great mix. But it's hard to get the international share up because Canada keeps doing so darn well.
This interview has been condensed and edited.