Royal Bank of Canada Seeks Buyers for Money-Losing US Consumer Bank

Strategic Insights -

Royal Bank of Canada, the country's largest lender, is looking to sell its struggling US consumer bank, RBC Bank, according to sources with knowledge of the talks. The bank has been working with JPMorgan Chase & Co. to find a buyer, with potential suitors including U.S. Bancorp and PNC Financial Services Group Inc. Analysts say the bank's lack of a strong US presence and significant losses in the past have made it a non-core asset.

Key Takeaways:

  • Royal Bank of Canada is seeking buyers for its US consumer bank, RBC Bank, which has been struggling with significant losses.
  • The bank has invested around $4.6 billion in the US market over the past decade, buying banks in southeastern states including North Carolina, Florida, and Alabama.
  • RBC Bank had 10 consecutive quarterly losses before returning to profitability in the first quarter of 2011, according to financial statements.
  • The bank's CEO, Gordon Nixon, said in a March 3 interview that the US consumer bank lost money in the first quarter.
  • RBC Bank had $4 billion of equity capital and $27.6 billion of assets as of December 31.
  • Royal Bank has spent two years reorganizing RBC Bank, which included cutting over 1,000 jobs, replacing management, and paring commercial lending to restore profit.
  • Analysts say that without a strong presence in the US market, Royal Bank's US consumer bank is a non-core asset that would be better off being sold.

Statistics:

  • Royal Bank invested around $4.6 billion in the US market over the past decade.
  • RBC Bank had 10 consecutive quarterly losses before returning to profitability in the first quarter of 2011.
  • The bank had $4 billion of equity capital as of December 31.
  • RBC Bank had $27.6 billion of assets as of December 31.
  • Royal Bank cut over 1,000 jobs during the restructuring of RBC Bank.

Sources:

  • Bloomberg News
  • Toronto Star