Royal Bank of Canada, one of the fastest growing banks in global wealth management of recent years, has done a sharp about-turn. It wants to exit from Switzerland and is closing some international businesses in North America along with the Caribbean, as it seeks less risky client business, writes John Evans
Royal Bank of Canada (RBC) has, reportedly, put its Swiss private banking business up for sale as part of a programme to downside its international wealth management operations, joining a number of other foreign banks which have decided to pull out of Geneva and Zurich.
The Canadian giant, in an apparent move to exit more risky private client activities, wants to get out of wealth management businesses in the Caribbean and concentrate on Canada, US, the British Isles and Asia, and focus on the super-rich UHNWI clients. The largest bank in Canada manages about $850bn, making it one of the largest wealth managers worldwide.
The planned Swiss divestment by RBC follows moves by Britain’s RBS to sell the Swiss-based international arm of private bank Coutts (see accompanying story) for up to $1bn.
Among other exits from Switzerland, Standard Chartered signalled earlier this year it was also looking to sell its Swiss operations, although the bank has not yet confirmed whether a deal has yet been concluded. Morgan Stanley, Lloyds Private Bank and Bank Leumi have also pulled out in the past year or so.
RBC’s planned sale of its Swiss operations is part of the "realignment" of its international businesses, a strategy causing significant internal discontent within the bank. It’s charged that the restructuring is being pushed through hastily before many loose ends are tied up. As many as 300 jobs could go under the shake-up.
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There’s a lack of communication over the realignment, these disgruntled RBC executives complain privately. One, requesting anonymity said, "Those that know they will be shown the exit are very few but there are no retention packages in place to ensure an orderly sale as any buyer would want to keep the top performers."
Another banker said he had no guidance about what to tell his clients over the restructuring.
RBC wealth head George Lewis, in an internal memo to staff seen by Private Banker International, said that, to bring clarity of focus, RBC is "realigning our RBC Wealth Management – International business unit to concentrate on serving our international cross-border clients from our British Isles offices in the UK, Jersey and Guernsey. Stuart Rutledge will continue to lead this business.
"In support of this strategy and following the closure of our International Private Banking business in the US, we have made the difficult but necessary decision to exit our International Advisory Group (IAG) offices in the US, our IAG and international private banking offices in Canada (excluding Vancouver) and our Wealth Management – International Caribbean business. We are realigning our Vancouver-based international advisory and international banking operations, which focus on Asia-based clients, into our Wealth Management – Canada business."
Lewis added, "We will continue to evolve our Asia business and focus on Asia-based clients, managed from our offices in Hong Kong and Singapore, under the leadership of Barend Janssens. In line with our decisions for Wealth Management – International, we have commenced a strategic review of our RBC Suisse business."
According to people familiar with the divestment plans, JP Morgan has been hired to sell RBC Switzerland. The business employs about 130 in Geneva and manages client assets of approximately CHF10bn. It reported a net profit of CHF9.3m for 2013.
About 60% of client assets are from Latin America as the Swiss business has a Miami affiliate. It also has a substantial number of customers from Africa — an overall business mix which should attract interest from potential suitors, particularly Latino banks like Itau and Safra Group.
Buyers will also be sought for other businesses which RBC is exiting. According to Toronto sources, the Caribbean region made $50m in profits after tax at its peak. The Canadian wealth offices added another $10m to $15m in profits. By contrast, the Asian wealth business, which is being retained, has made significant losses in the past two years.
An RBC spokesman declined to comment further on the bank’s strategy.