It would appear that after 28 years at RBC, there is no stopping the larger-than-life George Lewis. PBI’s editor, Mark Foxwell, sits down with the charismatic leader to find out more about the bank’s strategy, and the reasons behind RBC becoming one of the world’s leading wealth management businesses.
With up to C$2bn at his disposal, George Lewis is a force to be reckoned with.
One would presume that being at the helm of RBC Wealth Management, the sixth-largest wealth management business in the world, would be enough even for the most talented of professionals.
But for the banking heavyweight it does not stop there. Lewis also holds the title of chairman and portfolio manager for Royal Bank of Canada’s Global Asset Management business, the asset management business that forms part of RBC Wealth Management.
Standing at a staggering six feet six inches, the man behind RBC’s wealth business looked fairly intimidating as he stood up to greet me at RBC’s UK headquarters overlooking London Bridge.
But after only a few minutes of talking to the keen golfer I was surprised to find a rather laid back and modest character.
"I’ve been able to work in all different parts of our business, starting in capital markets where I spent time in investment banking, as director of research, and as head of cash equities. About 14 years ago I moved over to head up our mutual fund business, then had responsibility for banking products.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below formBy GlobalData
"We created a global wealth segment in 2007, which I’ve led since that time and now have oversight of the Insurance business," says Lewis. Modest he may be, but the banks aggressive global strategy is far from it.
RBC’s wealth management division has assets under management (AuM) of roughly $1trn. Its asset management business, with current assets of more than $300bn, is the second-fastest-growing asset manager in the world after Blackrock.
"RBC Wealth Management includes our global asset management business; in fact that’s one of our three principle strategic imperatives, to continue to grow our global asset management business. It represents close to 60% of our segment’s profits, with around 15% of the employees. So it’s a business that can be leveraged," says the group head.
Lewis has managed to position the wealth management business to operate in conjunction with the asset management division. Collaboration between capital markets, the commercial bank and wealth management has allowed RBC to aggressively expand. The bank’s asset management business saw its AuM double from 2007 to 2012, despite the global financial crisis.
"Both asset management and wealth management are businesses that don’t require significant amounts of capital to grow organically.
"I like to say we grow with our clients’ balance sheets rather than the bank’s balance sheet. Wealth management is a very good complement for RBC’s other businesses like capital markets, which do need balance sheet to meet client needs," comments Lewis.
In December 2010 RBC acquired London-based BlueBay Asset Management for C$1.52bn, and it sits within the RBC Global Asset Management business. The purchase of the money manager, which specialises in fixed-income funds, added $40bn in AuM to RBC’s business along with 250 staff.
Speaking about BlueBay, Lewis says: "We have continued to grow, particularly in emerging-market fixed-income, but also in our credit specialty strategies – they have a direct lending fund, a high-yield fund, a convertible fund.
"We believe that as interest rates begin to increase, BlueBay and RBC are very well positioned because of this credit strategy, in contrast to traditional fixed income managers"
Lewis expects RBC Wealth Management client assets to grow by a further 5-7% this year, with growth coming from clients in both developed and emerging markets.
Lewis explains that on the wealth side, beyond its significant domestic wealth business in Canada and the US, it is focused on clients from emerging markets.
"That’s the lion share of our client base here in the British Isles, and in Switzerland, Singapore and Hong Kong. So, Eastern Europe, the Middle East, Africa, Latin America, Asia: we continue to see good growth from all those areas," he says.
He adds: "We regularly capture about 20% of the fund flows in Canada in our asset management business, but it’s still a growth market for us.
"We have invested in both the advice-giving capability in our branch network, and in the manufacturing capability within the Global Asset Management business. And large part of what we do is to construct portfolio solutions for clients – whether they are conservative, balanced, or after growth – and provide value-added strategies that includes BlueBay funds where appropriate."
He continues: "Here in London, we have close to 60 professionals on the equity side of the business, in RBC Global Asset Management.
The emerging market equities fund now has a very good three year track record, and we’ve hired a global equity team recently from First State."
Despite the growth strategy, Lewis still wants to see a greater amount of wealth management clients using RBC’s asset management solutions, which is lower than some of the other global players.
Five years ago RBC had a relatively small presence in London compared to other global banks, despite being present for over a century.
This is now beginning to change, with London seen by Lewis as one of RBC’s global hubs.
In recent years RBC Wealth Management has gone on a major expansion plan. Lewis says the bank has significantly grown its relationship manager team in London, which has doubled in the last three years, with further growth planned, capitalising on London’s position as a hub attracting ultra high net worth (UHNW) and internationally mobile wealthy individuals.
"The way we would look at the UK market, and this would be true across RBC, is it’s very much our third home market. Clearly in Canada, we aim to be number one, and are number one in many aspects of financial services.
"In the US we’ve grown a very significant capital markets business and wealth business.
"On the capital market side we would now derive more of our profit from the US than we do in Canada."
He adds: "Our growth in the UK onshore has been more recent, going back three or four years when we made the decision to expand our London-based capability significantly.
"From an asset management perspective, we very much view the European market and the UK market as an attractive one, it’s a deep one. So we have a much more significant presence now than we did five years ago, both through Blue Bay and our RBC Global Asset Management equity teams, as well as through our British Isles wealth business which focuses on a multi-solution wealth offering to HNW and ultra-HNW clients."
Lewis is now on the hunt for a US acquisition of up to $2bn to beef up its asset management capabilities and obtain the extra firepower needed to expand further. "We now have a large number of capabilities that we can market into the US market.
We do have a good business there, a growing sales team, but if we’re able to find an acquisition in the asset management area that would be able to expand our distribution into the US, that would be of interest.
"We have been expanding our asset management business through acquisitions in recent years, including our acquisition of BlueBay.
"We are looking for opportunities to expand further and are open to negotiations." The Ontario-born banker is also open to expanding the wealth management side if an opportunity presents itself.
Despite RBC remaining relatively unscathed by the global financial crisis in 2008, there have certainly been obstacles to overcome. Low interest rates had a negative impact on the profitability of many banks’ business models.
"You’ve seen some banks, such as ourselves, continue to grow client assets, which we view as the best indicator of success.
"That has not translated into as much earnings growth as would have occurred in a normal rate environment. And so you put that together with increasing investments being required to address risk and compliance and client needs, and it does result in the need to have the right scale, in these international centres."
Lewis realises that the bank needs to grow further in Asia to achieve that, in RBC’s case. He adds: "If you look, there are a large number of banks involved in private banking, so for us it’s an important part of our overall strategy.
"But I could easily see that for others, making the decision for this is maybe not as core as it once was. So I do expect there to continue to be consolidation."
In terms of lending Lewis says: "Our ratio of deposits to loans is 2:1, so we are growing our lending business, but we need to grow our deposit business to provide a source of liquidity to RBC."
Expansion during the global financial crisis has paid off for Lewis and his team. The bank is reaping the rewards of a carefully groomed expansion policy. However time will tell if a continued approach will pay off as successfully as the past five years.