RBC eyes more U.S. expansion after City National deal

Fri Jun 17, 2016 11:46am EDT
 
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By Matt Scuffham

TORONTO (Reuters) - Royal Bank of Canada (RY.TO: Quote) plans further expansion in the United States following its $5 billion acquisition of Los Angeles-based City National in November, Chief Executive Dave McKay said on Friday.

McKay said acquiring City National gave the bank an "enormous opportunity" to grow in the U.S. and it could look at further acquisitions to supplement organic growth.

"We would consider strategic options to make small acquisitions that could help accelerate growth in the United States and provide a good payback to shareholders in a reasonable period of time," he said.

RBC sees the United States as a key growth market, offering opportunities to expand its wealth management and capital markets businesses at a faster rate than in Canada, where it already has a dominant position.

"We have invested in the California economy, which is the size of the Canadian economy, so there's enormous opportunity to grow here and clearly organic opportunity to expand into other cities using RBC's wealth management and capital markets strength to take City National there," he said.

The purchase of City National, known as Los Angeles' "bank to the stars" because of its ties to the movie industry and celebrities, gave RBC an opportunity to access high net-worth clients in the United States.

RBC Chief Financial Officer Janice Fukakusa told investors on a conference call on Friday that the bank expects City National to more than double its pre-tax profit to over $1 billion by 2020, and said total integration costs from the merger are expected to be between $130 million and $150 million, 25 percent to 30 percent less than originally anticipated.

The deal enables RBC to provide investment banking services to City National's commercial, private banking and entrepreneurial customers and City National to offer wealth management services to RBC clients.   Continued...

 
A Royal Bank of Canada (RBC) sign is seen outside of a branch in Ottawa, Ontario, Canada, May 26, 2016. REUTERS/Chris Wattie - RTX2EC7Q