September 22, 2009 / 2:08 PM / 9 years ago

UPDATE 2-RBC says to eye smaller deals when time is right

* Hasn’t seen any acquisitions that fit strategy yet

* Will likely be smaller deals, not blockbusters

* Not yet ready to increase dividend

(Adds details, quotes)

TORONTO, Sept 22 (Reuters) - Royal Bank of Canada (RY.TO) isn’t ready to make acquisitions or increase its dividend, but would look for smaller deals once it is sure the market has hit bottom, a senior company executive said on Tuesday.

RBC Chief Financial Officer said the conservative culture at RBC, Canada’s largest bank, meant it would conserve its capital until it was sure the time was right — even if that meant paying more for an acquisition.

“We haven’t seen anything that actually makes sense for us because the assets that are offered up don’t fit with us strategically,” Fukakusa said at an institutional investors conference in Toronto hosted by Canadian Imperial Bank of Commerce.

“Our preference, being fairly conservative, is to wait to see the market going up, to maybe pay a little more to have the certainty that we have bottomed out. So we’re not thinking that we have seen the bottom,” she said.

Canada’s big five banks have emerged from the financial crisis at the top of the global banking heap, having accepted no government bailouts and remaining mostly profitable throughout. Their high levels of capital have prompted speculation the Canadian lenders are poised to snap up weaker rivals to increase their market reach.

Fukakusa largely dismissed the suggestion that RBC, with Tier 1 capital at nearly 13 percent, could make a blockbuster acquisition to gobble up market share in either U.S. retail banking or global wealth management.

“I think that given our conservative focus and our actual guidelines that we use in terms of accretion, in terms of dilution, that would be a hard thing for us to swallow,” she said.

“I think we look at more bite-sized acquisitions given the breadth and depth of our businesses ... that’s how we would more look at that, rather than a ‘bet the company’ (acquisition),” Fukakusa said.

She also said the bank was not yet prepared to return capital to shareholders with stock buybacks or dividend increases.

“We want to preserve until we think we’re through the worst of this cycle and then we will look actively at things like buybacks, dividend increases. We won’t look at dividend increases until we have a couple of quarters where we think we have a trajectory with some earnings stability.”

Reporting by Andrea Hopkins; editing by Frank McGurty

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