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RBC selling it's US branches; TD may buy HSBC branches in western NY

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  • Jun 21st, 2011 6:37 am
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Nov 18, 2009
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http://www.theglobeandmail.com/report-o ... le2067012/

RBC strikes deal to shed U.S. retail arm
TARA PERKINS AND GRANT ROBERTSON
Globe and Mail Update
Published Sunday, Jun. 19, 2011 7:45PM EDT
Last updated Sunday, Jun. 19, 2011 8:15PM EDT

Royal Bank of Canada (RY-T54.330.641.19%) is selling its struggling U.S. retail bank for $3.62-billion (U.S.) to PNC Financial Services Group Inc. (PNC-N57.79-1.68-2.82%) in a deal that will be formally announced on Monday, people familiar with the matter said.

The price tag includes $165-million for credit card assets related to RBC’s U.S. bank, sources close to the deal said. PNC, the seventh-largest U.S. bank by deposits, will be paying with a mixture of cash and up to $1-billion of stock.

While the move represents a retreat for RBC from U.S. retail banking, Canada’s largest bank maintains large and profitable investment banking and wealth management operations south of the border. RBC plans to keep a U.S. banking licence to serve cross-border clients, including about 200,000 Canadians who bank in the U.S. through RBC.

The deal to sell RBC’s 426 branches brings to an end a decade-long experiment in U.S. retail banking for RBC, which bought its first branches in the Southeast in 2001, starting with the Carolinas. The bank later added banks in Alabama, expanding on a footprint that includes Georgia, Florida and other states.

The sale will boost RBC's tier-one capital levels. However, RBC is expected to take a charge of roughly $1.5-billion as a result of the deal.

For PNC, the deal will give the U.S. bank a significantly larger presence in the southeastern U.S. The Pittsburgh-based bank will be doubling its branches in Florida, and filling in holes in its branch network up the eastern coast.

The deal comes at a time when RBC’s Canadian rivals are expanding in the U.S. retail banking market. Toronto-Dominion Bank purchased a collection of small Florida banks last summer, adding to a network of U.S. branches that now numbers roughly 1,300. TD also bought the auto lending business Chrysler Financial Corp. for $6.3-billion (U.S.)

In December, Bank of Montreal announced a deal to buy Midwestern U.S. bank Marshall & Ilsley Corp. for $4.1-billion, expanding its footprint in Wisconsin, Missouri and other states in the largest deal of BMO’s history.

RBC bought North Carolina-based Centura Bank in 2001 for $2.2-billion and has struggled to make the business profitable. The bank, largely a collection of rural branches known for lending in real estate and construction, was hit hard during the economic downturn when the housing market in the U.S. collapsed. RBC took a $1-billion writedown on its U.S. operations in 2009.

RBC chief executive officer Gordon Nixon had indicated over the past year that the U.S. bank was no longer a strategic priority, indicating that the bank could sell the operation or seek out a partner. The CEO turned to investment bank JPMorgan Chase this year to find a buyer. PNC rival BB&T Corp. is also understood to have been in the running before PNC finalized the deal.
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[QUOTE]RBC plans to keep a U.S. banking licence to serve cross-border clients, including about 200,000 Canadians who bank in the U.S. through RBC.[/QUOTE]

Good news.
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TodayHello wrote: Thanks for the up to date link ..... lets see what this does to RBC stock ....

Any predictions? Up or down?
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"Dominion Bank of Toronto"???
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[QUOTE]RBC plans to keep a U.S. banking licence to serve cross-border clients, including about 200,000 Canadians who bank in the U.S. through RBC. .[/QUOTE]

...so how will that work?
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PNC confirmed the purchase this morning
http://www.bloomberg.com/news/2011-06-2 ... -unit.html

As for keeping the Banking License, pretty simple. If that's in fact what's happening, then they'll sell the Branches and US Customer Portfolio to PNC while becoming essentially a "virtual bank" for their Canadian Clients.
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Jan 12, 2003
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angel_wing0 wrote: ...so how will that work?

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 /CNW/ - 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' total revenue.

RBC Capital Markets LLC and J.P. Morgan Securities LLC served as financial advisors to Royal Bank of Canada in this transactio
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In the grand scheme of things, where does RBC's Capital Markets / iBanking division really sit ....... it sounds like they are expanding aggressively
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Justin wrote: Any predictions? Up or down?

Up $0.60 in the first few minutes of trading ....... going to keep an eye on it this week
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CorSter wrote: PAs for keeping the Banking License, pretty simple. If that's in fact what's happening, then they'll sell the Branches and US Customer Portfolio to PNC while becoming essentially a "virtual bank" for their Canadian Clients.

oic! thanks
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angel_wing0 wrote: oic! thanks

Alternatively, they may sign an agreement with PNC or another US bank to service Access USA accounts which are "owned" by RBC.
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Do canadian banks(or companies) know how to compete in globe?
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It must be nice to be a banker in the U.S. and have your bank taken over by TD. It's like, not only do you not lose your job (or are less likely to at least) but you go from working for some lame bank to such an awesome company!
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TD is already has a crapton of branches in Manhattan... we were just there last month and you can't even walk two blocks without running into one.
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