Royal Bank of Canada trading shift should lower volatility: CFO

Mon Dec 7, 2015 5:57pm EST
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By John Tilak

TORONTO (Reuters) - Royal Bank of Canada's (RY.TO: Quote) shift to put more emphasis on corporate investment banking and reduce its reliance on trading should lower the volatility of its capital markets business, one of its top executives told Reuters on Monday.

The volatility of trading revenue was highlighted during the summer, when worries about China’s economic growth sent global markets into a spin.

RBC, Canada's most valuable company by market capitalization, would be comfortable if investment banking accounts for about 60 percent of its capital markets revenue, Chief Financial Officer Janice Fukakusa said in an interview, adding that the lender has been allocating more capital to the business in recent years.

Investment banking and lending fees account for about 60 percent of capital markets revenue, compared with roughly 40 percent for trading, spokeswoman Claire Holland said.

In 2010, investment banking and lending fees formed about 47 percent of the capital markets unit.

"We recognize that because there's potential for downside volatility, we need to take as much volatility (as possible) out of our earnings stream, in particular within capital markets," Fukakusa said.

RBC's capital markets division includes a corporate investment banking arm that lends to companies. It has advised Enbridge (ENB.TO: Quote), Permira Advisers and Informatica Corp, among others, on deals.

It also includes the global markets unit, which is home to fixed income, foreign exchange, equity sales and trading.   Continued...

Royal Bank of Canada (RBC) Chief Financial Officer Janice Fukakusa speaks in her office in Toronto December 7, 2015. REUTERS/John Tilak