RBC CEO sees no need for big acquisitions after City National deal
By Jeffrey Hodgson
TORONTO (Reuters) - Royal Bank of Canada (RY.TO: Quote) is in no rush to do more acquisitions now that its $5.4 billion deal for City National Corp CYN.N gives it a platform to expand in U.S. wealth management and commercial banking, RBC's chief executive said.
Canada's No. 1 bank said the deal, announced on Thursday, was driven in large part by its desire for City National's stable of high-net worth clients and by the high quality of the Los Angeles-based bank.
"I wouldn't call it a one-and-done, but we don't need to make other acquisitions to achieve our goals. This is such a strong platform," RBC Chief Executive Dave McKay told Reuters. "It's the piece that was missing."
"If an acquisition presented itself, a small one that accelerated a new market entry, whether it be Houston or Washington, we would consider it if it presented great short-term shareholder value accretion ... but it's not necessary."
McKay, who took over leadership of RBC in August, said the lender would also look at smaller acquisitions in the alternative asset management space, such as real estate, that would help it better serve big institutional clients.
RBC offered a roughly 26 percent premium to secure the deal for the U.S. private and commercial bank. But McKay said the price was merited by the quality of the lender and potential cost savings.
"I'm paying a billion-dollar premium. And I feel strongly I can drive $200 million in synergies," he said, adding the deal offers upside from a strengthening U.S. economy and projected U.S. interest rate increases.
McKay said the transaction was also informed by RBC's acquisition more than a decade ago of North Carolina-based mass-market lender Centura, which turned into a cash sinkhole. RBC eventually sold off Centura. Continued...