RBC refocuses U.S. growth strategy
- Sells regional U.S. retail banking operations to PNC
- Reaffirms U.S. growth strategy to focus on Wealth Management
and Capital Markets
- Maintains RBC cross-border banking platform
Raleigh, NC, June 20, 2011 — Royal Bank of
Canada (RY on TSX and NYSE) today announced that it is refocusing
its U.S. growth strategy by entering into definitive agreements
by which RBC will sell its U.S. regional retail banking operations
to the PNC Financial Services Group, Inc. (PNC), for approximately
US$3.62 billion consisting of US$3.45 billion for the purchase
of RBC Bank (USA) and US$165 million for the purchase of related
credit card assets. The purchase price is comprised of cash
and PNC common stock of up to US$1 billion at PNC's option.
"RBC remains fully committed to the U.S. market and
this transaction allows us to focus our U.S. efforts on continuing
to grow our two largest U.S. businesses, RBC Wealth Management
and RBC Capital Markets," said Gordon M. Nixon, president
and chief executive officer, RBC. "In addition, we will
maintain our existing cross-border banking platform for current
and future clients with a targeted suite of cross-border products
and services to meet their needs."
"We have built global capabilities and market-leading
businesses in RBC Wealth Management and RBC Capital Markets
and are committed to leveraging our strengths to invest in
these and other high-return businesses," said Mr. Nixon.
"We continue to actively deploy our capital where we
believe we can generate the highest returns."
"PNC is a market-leading organization that can build
on the recent improvements we have made in operations and
effectively serve clients as the market returns to more stable
conditions," said Jim Westlake, group head, International
Banking and Insurance, RBC. "We are pleased that this
is the best outcome for all of our stakeholders."
RBC expects the transaction to result in an estimated loss
of C$1.6 billion under Canadian generally accepted accounting
principles (GAAP) on an after-tax basis, which includes an
estimated goodwill write off of C$1.3 billion (C$1.4 billion
pre-tax). The estimated loss will be recorded in the current
quarter. The purchase price is subject to an adjustment at
close for actual net tangible asset value delivered, which
is not expected to have a material impact on the loss. All
amounts are based on estimates and are subject to change.
Had this transaction taken place as at April 30, 2011, on
a pro forma basis, RBC's Tier 1 capital and Tier 1 common
equity ratios would have improved by approximately 140 bps
and 100 bps respectively. This transaction is expected to
be accretive to earnings in 2012. All amounts are based on
estimates and are subject to change.
The transaction is subject to customary closing conditions,
including regulatory approval, and is expected to close in
March of 2012.
Maintains RBC Cross-Border Banking Platform
Subject to regulatory approval, RBC will maintain U.S. banking
operations to serve the needs of Canadian clients across the
U.S. and will continue to provide banking services to RBC
Wealth Management and RBC Capital Markets in the U.S.
RBC will continue to offer RBC Access USA® products,
including funds transfer between Canada and the U.S., the
option of preferred foreign exchange rates and a no fee RBC
Royal Bank US Dollar Visa Gold card. Cross-border banking
clients will continue to have seamless access to funds and
banking products such as mortgages, loans, automated teller
machine (ATM) access, U.S. dollar accounts, debit and credit
cards and integrated online banking.
RBC's growing global businesses in the U.S.
RBC's growth strategy in the U.S. is focused on RBC Wealth
Management and RBC Capital Markets, its two global businesses,
which combined have approximately 8,000 employees in the U.S.
and almost 17,000 worldwide.
RBC Wealth Management is the fifth largest full-service advisory
firm in the U.S. with $220 billion in assets under administration
and over 2,000 financial advisors operating across 42 states
providing a full service wealth management offering including
investments, retirement planning, cash management, credit
and lending, insurance, and trust and estate planning to affluent
and high net worth domestic and international clients. RBC
Wealth Management's operations in the U.S. also include RBC
Global Asset Management (U.S.) Inc., which offers equity and
fixed income investment solutions to institutional investors
throughout the United States.
RBC Capital Markets is the 11th largest global investment
bank by fees according to Bloomberg. In the U.S. RBC Capital
Markets LLC offers full-service brokerage and investment banking
services to individual, institutional, corporate and governmental
clients with a product offering that includes: fixed income,
equities, equity and debt capital markets, research, municipal
finance, futures, M&A and infrastructure finance.
Our focus on growing client relationships through increased
sector coverage and extending our loan book has driven strong
revenue growth and has established RBC Capital Markets as
a top-tier provider of both client and trading focused products
and services in the U.S. RBC Capital Markets' U.S. staff has
grown by more than 25 percent over the last three years and
generates approximately 40 percent of RBC Capital Markets'
RBC Capital Markets LLC and J.P. Morgan Securities LLC served
as financial advisors to Royal Bank of Canada in this transaction.
Conference Call and Webcast
A conference call and webcast is scheduled for Monday, June
20, 2011 at 8:00 am ET and will feature a presentation by
Interested parties can access the call live on a listen-only
basis at: www.rbc.com/investorrelations/ir_events_presentations.html
or by telephone (416-340-2217 or 1-866-696-5910,
Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries
operate under the master brand name RBC. We are Canada's largest
bank as measured by assets and market capitalization, and
among the largest banks in the world, based on market capitalization.
We are one of North America's leading diversified financial
services companies, and provide personal and commercial banking,
wealth management services, insurance, corporate and investment
banking and transaction processing services on a global basis.
We employ approximately 79,000 full- and part-time employees
who serve close to 16 million personal, business, public sector
and institutional clients through offices in Canada, the U.S.
and 56 other countries. For more information, please visit
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this press
release may be deemed to be forward-looking statements under
certain securities laws, including the "safe harbor"
provisions of the United States Private Securities Litigation
Reform Act of 1995 and any applicable Canadian securities
legislation. These forward-looking statements include, but
are not limited to, statements with respect to the acquisition
of RBC Bank (USA) and related assets, the U.S. retail banking
operations of RBC (RBC Bank®), by PNC, and Royal Bank
of Canada's expected losses relating to this transaction.
Forward-looking statements are typically identified by words
such as "believe", "expect", "foresee",
"forecast", "anticipate", "intend",
"estimate", "goal", "plan" and
"project" and similar expressions of future or conditional
verbs such as "will", "may", "should",
"could", or "would".
By their very nature, forward-looking statements require
us to make assumptions and are subject to inherent risks and
uncertainties, which give rise to the possibility that our
predictions, forecasts, projections, expectations or conclusions
and other forward-looking information, including statements
about the acquisition of RBC Bank by PNC and Royal Bank of
Canada's expected losses relating to this transaction will
not be achieved. We caution readers not to place undue reliance
on these statements as a number of important factors could
cause our actual results to differ materially from the expectations
expressed in such forward-looking statements. These factors
include, but are not limited to the possibility that the proposed
transaction does not close when expected or at all because
required regulatory or other approvals are not received or
other conditions to the closing are not satisfied on a timely
basis or at all, that Royal Bank of Canada or PNC may be required
to modify the terms and conditions of the proposed transaction
to achieve regulatory approval, or that the anticipated benefits
of the transaction are not realized as a result of such things
as the strength of the economy and competitive factors in
the areas where RBC Bank does business; the impact of changes
in the laws and regulations regulating financial services
and enforcement thereof (including banking, insurance and
securities); judicial or regulatory judgments and legal proceedings;
the ability of PNC to complete the transaction; reputational
risks, and other factors that may affect future results of
RBC. We caution that the foregoing list of important factors
is not exhaustive. Additional information about these and
other factors can be found in our Q2 2011 Report to Shareholders
and 2010 Annual Report.
Except as required by law, Royal Bank
of Canada assumes no obligation to update the forward-looking
statements contained in this press release.
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