June 1, 2012 / 7:29 PM / 5 years ago

RBC Capital Markets sees gains from European bank woes

TORONTO (Reuters) - RBC Capital Markets expects to snatch some U.S. business away from retreating European investment banks, but the Royal Bank of Canada (RY.TO) subsidiary doesn’t plan to make big acquisitions or enter new markets, executives said on Friday.

The investment bank, a wholly-owned unit of Canada’s largest bank, has aggressively grown the business since the 2008 financial crisis, and was one of the top ten global investment banks in the world in the first quarter, as measured by fees.

But after three years of expansion in Europe, Asia and the United States, the investment bank is happy with its footprint, and plans to focus on its existing operations.

“We will continue to selectively add people to our business platforms and teams where it make sense, but our focus is on leveraging our current headcount with increased productivity,” Doug McGregor, co-chief executive of the unit, said at an investor presentation in Toronto.

“We have no intention of making large acquisitions or expanding our footprint.”

The unit has added about 1,000 people since 2008, he added.

The expansion has come as Canada’s big banks, which emerged from the financial crisis in strong shape, have pushed hard for international expansion.

RBC Capital Markets, meanwhile, has shifted its focus away from trading, which rises and falls with markets and can wreak havoc on earnings predictability, and towards investment banking and lending.

The bank said its focus going forward will be on deepening client relationships and maintaining stable costs, but officials acknowledged the European debt crisis could provide more opportunities to gain business in the United States.

“While American banks remain as competitive as ever, some European competitors are struggling, and marginal players are retrenching,” said Mark Standish, the unit’s other CEO.

He said that in 2011, foreign financial institutions accounted for a quarter of commercial and industrial loans made in the United States. That number should fall as large European lenders shrink their balance sheets.

“This shift creates opportunity for RBC capital markets to step up and grow market share in corporate and investment banking,” Standish said.

In the fiscal second quarter ending April 30, RBC Capital Markets contributed C$449 million ($431.34 million) to Royal Bank’s C$1.56 billion net income.

Reporting By Cameron French; Editing by Tim Dobbyn

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