RBC US arm seen as expendable

[jesseps]

After spending billions of dollars building a U.S. beachhead over the past decade, Royal Bank of Canada has nothing to show for the effort but a sea of red ink and little prospect of relief in sight. And now a report that Royal has put its U.S. life insurance business up for sale is prompting speculation that Canada’s biggest bank has had enough and is finally getting set to call it quits on the United States.

 

“They haven’t been able to make [the U.S. business] work,” said one analyst who asked not to be named. “They’re still bleeding money and the status quo doesn’t cut it.”

 

Facing the prospect of tougher capital rules, banks around the world are more than ever looking to cut costs and increase profit margins.

 

“Royal isn’t wedded to their U.S. strategy like some other banks because they only spent about $7-billion so they really haven’t invested a lot,” said John Stephenson, a senior vice-president and portfolio manager at First Asset Investment Management Inc. in Toronto. “I think they are saying, ‘It’s very hard to compete, we’re not making money and we’re tired of the flak we’re taking on a relatively small piece of our business.’ ”

 

Starting about a decade ago with the acquisition of North Carolina-based Centura Bank, Royal began building a base in the United States in a bid to compete with rivals Bank of Montreal and Toronto-Dominion Bank, both of which also are struggling to turn a profit south of the border.

 

RBC’s U.S. retail branch network now extends across much of the Southwest, including Florida, Georgia, Alabama and North Carolina. It has also moved into insurance through the purchase of Liberty Life Insurance Co. in 2000 for around $650-million.

 

But the business has been a drag on RBC, especially in the wake of the financial crisis as the bank took it on the chin from exposure to the U.S. real-estate meltdown.

 

Despite efforts to reorganize the bank, including a $1-billion writedown last year, the business remains a black eye for the bank. Back in March, Gord Nixon, Royal’s chief executive, told investors he is looking to fix the problem and that “everything is on the table,” including selling it.

 

With the recession in the United States showing little sign of letting up, there is growing speculation that may happen sooner rather than later.

 

A spokesman for the bank declined to comment Tuesday on reports that Royal has put its U.S. life insurance business up for sale. RBC has contracted with Goldman Sachs to solicit bids for Liberty Life, according to Bloomberg News, citing unnamed sources. The buyer is expected to pay as much as $1-billion.

 

Analysts speculated that if the bank was looking to get out to the United States, selling the insurance business first would make sense strategically because it’s in comparatively good shape and likely to fetch a good price, compared to the banking operation, which is clearly ailing.

 

According to RBC, Liberty Life is one of the top 25 life and health insurers in the United States, providing various insurance products as well as annuities.

 

Royal has used the turmoil of the plast few years as an opportunity to reorganize its operations around the world, hiring executives and acquiring assets in areas such as wealth management and capital markets where it has been most profitable, while pruning back poorly performing businesses.

 

“In this day and age you are going to pay a lot more attention to what you do well and you’re probably going to look at getting out of what you can’t do well,” said a senior executive at a major pension fund.

 

(Courtesy of the Financial Post)

[Cyrus]

I hate how Canadian banks "rebranded" themselves in the late 90's as these abbreviations...

 

"RBC" sounds so lame... now Royal Bank of Canada sounded like a real bank Or Toronto Dominion Bank...

 

Or even the Bank of Montreal, I mean, "BMO"? It sounds like a disease...

[jesseps]

I hate how Canadian banks "rebranded" themselves in the late 90's as these abbreviations...

 

"RBC" sounds so lame... now Royal Bank of Canada sounded like a real bank Or Toronto Dominion Bank...

 

Or even the Bank of Montreal, I mean, "BMO"? It sounds like a disease...

 

We Canadians have been getting fat and lazy. Blame our neighbours to the south

 

BMO is a disease thats been great to me nice little profit

Modifié 11 août 2010 par jesseps

[Cataclaw]

Screw abbreviations, real men call the banks by their full names.

[jesseps]

Screw abbreviations, real men call the banks by their full names.

 

Canadian Imperial Bank of Commerce is a mouthful

[TomOfBoston]

TD Bank is one of the biggest banks in Boston. A poll of customers showed that 87% did not know what "TD" stood for. When told that the T stood for Toronto, 40% asked if that was in Italy.

 

OK, so I made the last part up.

Modifié 11 août 2010 par TomOfBoston

[Cyrus]

Canadian Imperial Bank of Commerce is a mouthful

 

Imperial! Commerce! All these names sound so regal and yet, businesslike It's nice to see on the building facade at least, like on some 19th century banks, particularly when they are still operating, like the TD on Guy and Ste Catherine... TD can get away a little with the abbreviation since it is so quick and sounds okay, but RBC (or worse, NBC/BNC) is just a joke...

 

We Canadians have been getting fat and lazy. Blame our neighbours to the south

)

 

Not even, they're all like "Bank of America" or "xxxx Bank", even Desjardins Bank in Florida... and they have free "checking" accounts with "free checks for life", there's something our banks could learn from instead of service fees and 20$ for a chequebook...

Modifié 11 août 2010 par Cyrus

[LindbergMTL]

TD Bank is one of the biggest banks in Boston. A poll of customers showed that 87% did not know what "TD" stood for. When told that the T stood for Toronto, 40% asked if that was in Italy.

 

OK, so I made the last part up.

 

J'étais dans le coin de Voorhees au Sud du New Jersey. L'icone TD y est partout. Ils sont en train d'y construire un siège social et ils ont même des bureaux satellites imposants un peu partout. Ils ont dû attraper quelques banques en faillites pour des bouchées de pain ces dernières années. Nullepart on y voit un lien avec le Canada.