We now have a more integrated wholesale
and commercial financial services business. In 2004, we sought
to enhance all our business clients’ experiences by delivering
more focused products and solutions. As the following highlights
of our 2004 activities demonstrate, we are motivated to help businesses
and institutions successfully compete locally or globally.
Our business strategy is founded on building
strong and lasting relationships with our clients. In 2004,
we advanced this principle on several fronts with our business and
institutional clients, including small and medium enterprises and
commercial markets clients. Moreover, the ongoing dialogue that comes
with a strong relationship enables us to anticipate client needs
and structure solutions accordingly.
To more effectively meet the financing needs
of our targeted mid-market clients, we invested in the development
of a new Financial Analysis Certification program and introduced
the designation of Financing Specialists for employees who complete
This investment in the new program is paying
dividends in the form of higher client satisfaction.
The number of mid-market business clients who say they are very
satisfied with our financial advice has increased 50 per cent over
the past three years. Furthermore, when Canadian mid-market companies
were asked in the latest Maritz Research Market Survey to name
their main financial institution, more companies continued to name
RBC Financial Group than any other institution.
In 2004, we trained and placed specialized relationship
managers in key markets focused on the needs of specific client
segments such as Canadian manufacturers who exhibit high growth
and professionals. Loyalty scores for clients managed by these
specialists are 25 to 50 per cent higher than the overall segment.
In Canada, we continued in a lead market share
position in both business deposits and business financing in 2004,
with a business deposit market share of 20.20 per cent among banks
and a business financing market share of 11.30 per cent among all
financial institutions, both as at August 31, 2004.
We are seeking to build on this success with
new service and product enhancements. For example, we have the
capability to consolidate the financial services of a commercial
account on both sides of the Canada-U.S. border, including the
provision of credit facilities, operating accounts and a complete
of electronic services in both countries. From the client’s
perspective, this opportunity to have its North American banking
needs managed by one financial institution greatly simplifies the
management of its banking arrangements and clearly sets us apart
from the competition.
Business owners are also taking advantage
of today’s low interest rate environment to acquire or refinance
the premises housing their operations.
In Canada, this trend has led to strong growth in the volume of
commercial mortgage activity, and we originated over $1.4 billion
in commercial mortgages in 2004. Volume of term financing of real
estate assets by small and medium enterprise businesses and sales
of our Bricks and Mortar mortgage product, tailored
to the needs of small business owners, grew at double-digit rates
In parallel with providing individual clients
the ability to view cheques online through RBC
Online Banking in
July, we successfully provided the same feature to our business
clients. Throughout 2004, additional innovative features were added
to enhance the online client experience for all business and individual
clients. In particular, business clients were also provided with
the ability to view business deposit slips online.
Our commitment to creating a superior client
experience drove a number of initiatives that came to fruition
in 2004. For example, in February, we completed the integration
of our U.S. capital markets businesses within a common operating
platform, RBC Capital Markets Corporation. This resulted in significant
streamlining and brought increased efficiency to our U.S. equity
research sales and trading activities.
A vibrant and active capital markets environment
contributed to a strong year for our Global Capital Markets division.
In Canada, where we are the recognized leader for combined debt
and equity underwriting as measured by Thomson Financial, we were
selected by the Government of Canada to lead the underwriting syndicate
that raised $3.2 billion in a secondary offering of common shares
for Petro-Canada in September 2004. This was the largest ever transaction
of its kind in the history of the Canadian capital markets and,
on a global scale, ranked as the fifth-largest privatization add-on
in the past 10 years. The transaction, which enjoyed strong retail
and institutional demand, underscored our ability to generate strong
institutional orders on a North American basis. Our business strategy
for RBC Capital Markets is driven by the belief that we can only
achieve our goals by forging strong, deep and lasting relationships
with our clients. The Petro-Canada transaction exemplifies this.
We were lead underwriter for the Canadian government’s initial
public offering of Petro-Canada shares in 1991. Since that time
we have acted as the company’s lead advisor with respect to numerous financings
and mergers and acquisitions transactions and have consistently provided
clients research coverage, as well as being the number one trader
in its shares.
Earlier in 2004, we acted as co-lead and joint
book-runner for the $1.5 billion offering of trust units for Yellow
Pages Income Trust, the largest ever bought deal in Canadian history.
In October 2004, RBC Capital Markets led the
first offering of Enhanced Income Securities, an innovative structure
in the U.S., analogous to Canadian Income Trusts and Real Estate
Investment Trusts. We were the sole structuring advisor to B&G Foods Holdings Corp. and
book-running manager for the initial public offering that raised
US$300 million for the client.
Our Global Financial Products division also
raised the bar on the fixed income side of the business. In Canada,
for example, it led a $5.5 billion issue for Canada Mortgage and
Housing Corporation – the
largest single tranche offering in Canadian history – and
co-led a highly successful $US2.25 billion issue for Alcan Inc.
In Europe, our international bond group, based in London, jointly
led three inaugural bond issues, for a total of US$10 billion,
for Network Rail Infrastructure Limited,
the state-sponsored company that runs the British Rail network.
This marquee transaction demonstrated the strength of our world-class
global placement capabilities.
RBC Capital Markets also initiated the sale and acted as the sole
advisor to BreitBurn Energy Company LLC in the purchase of the
company by Provident Energy Trust for $139 million. This acquisition
represents the first U.S. energy company to be purchased by a
Canadian oil and gas income trust.
At the end of the fiscal year we announced plans
to combine the fixed income activities of RBC Dain Rauscher and
RBC Capital Markets. The resultant business is expected to have
nearly 1,200 employees in
48 locations in the U.S., Canada, Europe and Asia, serving 10,000
clients. Importantly, it will more sharply focus our ability to originate
and distribute a broader range of fixed income products to our global
We completed 44 municipal derivatives transactions
in 2004, a significant reflection of our ability to serve the financing
needs of U.S. municipal government clients. Our largest transaction
in the sector was completed with a major city in the Midwest and
a notional amount of US$200 million. In July, we completed our
first municipal derivatives transaction with a Florida municipal
entity. This high-profile client was brought to RBC Dain Rauscher’s
Fixed Income Group through our February 2004 acquisition of William
R. Hough & Co., exemplifying the value that deal provides.
With a growing move of institutional investors
into hedge funds, our Hedge Funds Service
Group leveraged our existing
Canada-based business by expanding prime brokerage services into
the U.S. market. This service provides our U.S.-based hedge fund
clients with integrated, custom-tailored prime brokerage products
and solutions, including centralized custody, trading flexibility,
securities lending, an interactive web-based portfolio management
system and other services designed to provide increased transparency
into hedge funds’ balance
sheets. In developing this service, our U.S.
Prime Brokerage group
partnered with our Institutional Equity group and our Alternative
Asset group to cross-market U.S. prime brokerage facilities.
Further evidence of new value-added services
to our clients includes the expansion of the Global
Currency Strategy group. This team, headquartered in London with staff in Toronto,
New York and Sydney, provides clients with top-ranked currency
strategy, market research and intelligence. Our Global
Treasury Services division has also expanded its presence
in the precious metals markets through the acquisition
of a team in September 2004, based in London, that provides world-class
global bullion products and services to central banks, institutional
investors, mining companies and hedge funds.
The businesses making up our Global Services
operations continued to leverage a solid and innovative product
line and high standards of client service while generating a 26
per cent increase in net income over the previous year.
During 2004, we added more services to our Internet-based
cash management delivery channel, RBC Express. The channel allows
business clients of all sizes to access cash management services
more easily and efficiently through a single and secure website.
With the growing number of services available, we are well positioned
to offer business clients a choice of online cash management products.
For the fifth year in a row, Stewart and Associates’ 2004 Survey
of Bank Fees rated us first overall for quality of service in cash
management in Canada. According to the 2004 Maritz: Thompson Lightstone
Cash Management and Electronic Business Banking Study, we are perceived
as the leader in technology and in cash management expertise in Canada.
According to the survey, we continue to enjoy a substantial lead
in market share. And, for the second consecutive year, Global
Finance magazine named RBC Global Services “Best Trade Finance Bank
In August, we introduced RBC
Online Global Trade Services, building
on our strategy to move to web-based technology for the delivery
of cash management and trade products. This Internet-based service
provides clients an easy and efficient way to manage global trade
With our launch of the new Automated
Securities Lending Exchange, we introduced the first fully automated global
lending service in Canada. This new product provides institutional
clients with continuous broadcasts of RBC Global Services’ equity and
fixed income inventory, the ability for borrowers to locate single
or multiple lines of securities in an instant, automated order
execution for single or multiple lines of securities and electronic
settlement of transactions as part of a single process. During
2004, RBC Global Services’ Securities Lending program achieved
a significant milestone by reaching over $55 billion in outstanding
securities loans. This represents significant growth, up from
an average of $32 billion in 2003,
and demonstrates the overall strength of our Securities Lending
In 2004, we were named the best overall
global custodian in Global Investor magazine’s 2004 Global Custody Survey, measured
by overall client service and value for money. We also ranked number
one for Best Global Custody Service in the R&M Consultants
annual global custodian survey.