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* CEO Nixon to be replaced by executive Dave McKay
* Timing a surprise, but successor expected
By Cameron French
TORONTO, Dec 5 (Reuters) - Royal Bank of Canada Chief Executive Gordon Nixon will step down next summer after 13 years at the helm of Canada's largest bank, handing the reins to the RBC's retail banking head, Dave McKay, the bank said on Thursday.
Nixon is the longest-serving of Canada's current crop of bank CEOs, but at 56, by no means the oldest. McKay, 50, had been widely expected to be Nixon's heir apparent, though not quite so soon.
"The timing was a surprise, but the appointment was not," said CIBC World Markets analyst Rob Sedran. "Dave has done a very good job running the bank's largest businesses. I was expecting him to get the job, just not this year.
Nixon's announcement, which came as RBC, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce all reported fiscal year-end results, caps off a changing of the guard at Canada's top three banks.
Rick Waugh, who became CEO of No. 3 lender Bank of Nova Scotia shortly after Nixon took the top job at RBC, stepped down in November in favor of Brian Porter.
TD Bank CEO Ed Clark said earlier this year he will retire in 2014 after 12 years on the job. He will be replaced by TD executive Bharat Masrani.
The three form a cohort that has led the country's largest banks through aggressive international expansion, particularly in the wake of the 2008 financial crisis.
Canada's big banks emerged from the crisis with little harm done, partly due to the industry's conservative culture and lending practices. They also benefited from a post-crisis housing boom that some critics warn could turn bust.
But for now, the banks have become larger players on the global stage as international rivals shrank around them.
RBC in particular has pushed hard to grow its global wealth management footprint, buying UK wealth manager BlueBay Asset Management in 2010 for $1.5 billion. It has also invested heavily in its capital markets business, especially in the United States.
That capital markets exposure has at times worried shareholders, but it has also led to strong profits, such as during the fourth quarter, where the unit boasted income of C$462 million, up 15 percent from the previous year, outperforming its Canadian rivals.
However, Nixon's legacy has hardly been spotless. When he took over as CEO in 2001, the bank had just completed a $2.2 billion purchase of North Carolina-based Centura bank.
That investment - which RBC built upon under Nixon - turned into a cash sinkhole for the bank as it first struggled to turn a profit and then was hit by the worst of the U.S. real estate crash.
"He's done a pretty good job, but he's dropped the ball on some occasions," said John Kinsey, a portfolio manager at Caldwell Securities in Toronto.
The unit was a drag on RBC's earnings and raised uncertainty about its U.S. strategy right up until Nixon finally agreed to sell it to PNC Financial Services in 2011 for $3.6 billion, taking a $1.6 billion write-down in the process.
"It clearly was an underperforming asset" Nixon said in an interview. "I certainty wish we had made the decision (to sell it) two or three years earlier because it would have been better for our shareholders."
Over the course of his time as CEO, however, RBC shares have risen 168 percent - second-best among Canada's five-biggest banks, trailing only the 180 percent gain by Scotiabank.
Nixon said he believed the time was right for a transition.
"It sounds trite, but it did just feel like the right time (to step down)," he said.
"I could have stayed an extra year, but I think it would have been an extra year rather than driving the long-term plans for the bank."
McKay, who will take over on Aug. 1, 2014, has been at the bank for 25 years. He ran RBC's Canadian retail bank business from 2008 to 2012, and last year he added responsibility for RBC's retail banking operations in the United States and the Caribbean, as well as its cards business.
Interestingly, both Nixon and McKay have mentioned over the past year that RBC might re-enter U.S. retail banking, particularly in the areas of internet banking and payment systems, though they have played down the idea of a large purchase in the space.
In an interview, McKay would not rule out an acquisition in the U.S. retail space.
"We would never say never," he said.
"It would have to make long-term sense. We recognize that we've stumbled in the past running in the past running those retail franchises in the U.S. for a lot of reasons."
Paul Gardner, partner and portfolio manager at Avenue Investment Management, which owns shares of RBC and TD, said he didn't expect any sort of a strategic shift for RBC under McKay.
"It's all about Canadian retail banking, and the continued growth of wealth management, which gives you stable earnings," he said. "(Nixon's) selling at the top in a sense. He's handing it off in fantastic shape."