Market Chatter: RBC Plans to Sit Out Bank Consolidation Wave in US, CEO McKay Says
07:51 AM EDT, 09/05/2024 (MT Newswires) -- Royal Bank of Canada Chief Executive Officer Dave McKay has a list of reasons he won't be shopping for a bank in the US anytime soon, Bloomberg is reporting.
McKay, who leads Canada's biggest lender, said he's not interested in paying for someone else's problems when it comes to attracting customer deposits or making the investments needed to grow from a mid-size regional bank to a large one.
"The first question I always ask myself on an acquisition is, 'Why are they selling and what problems am I inheriting, and can I run this business better than the current management team can?'" he said Wednesday at Bank of Nova Scotia's annual financial-industry conference in Toronto.
Bloomberg noted Scotiabank analyst Meny Grauman said the sentiment on Canadian takeovers of US banks seems to have turned negative, despite the fact that there's likely a "wave of consolidation" looming in the word's most-developed banking market.
"My message isn't a negative -- I love the US market," McKay said, noting that it's tricky to line up all of those factors and deliver returns for shareholders. But in today's uncertain environment, he'd rather focus on organic growth in the US, he said, echoing a remark he made last week during RBC's third-quarter earnings conference call: "We don't feel we need to bet the organization on a US acquisition."
Less than a decade ago, Bloomberg noted, McKay's first major move as CEO was to acquire Los-Angeles-based City National Bank for $5 billion. Bloomberg said that deal has "proved to be a headache" in recent years, with profitability challenges, a balance sheet bailout and a regulatory fine for compliance lapses. McKay characterized it as an "opportunistic" acquisition, made when the founding family was looking for an exit. While the subsidiary is "going through a bit of a lull," he said, "we'll make this bank great again."
(Market Chatter news is derived from conversations with market professionals globally, and/or from other media sources. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.