Photo: A Royal Bank of Canada branch on King Street East at Jarvis Street in downtown Toronto.
Royal Bank of Canada (RBC Financial Group)
In 1864, a number of Haligonian (Halifax, Nova Scotia) merchants founded The Merchants Bank. At that time, the Nova Scotian economy depended largely on the fishing and timber trade. The port city Halifax, strategically situated along the American South – Europe shipping route, benefited greatly from the trade between the two continents. The Merchants Bank at the time had closer ties with England and the Caribbean than with the other colonies that would later become Canada.
In 1867, however, several of Britain’s colonies in the North America confederated to become the new Dominion of Canada. The creation of the new country opened up new markets for Merchants Bank in its own ‘backyard’, so to speak. After obtaining a federal charter in 1869, the Merchants Bank was renamed Merchants Bank of Halifax. During the 1870s and 1880s, the bank established agencies in rural Nova Scotia, New Brunswick and Prince Edward Island, offering limited banking services. In 1882, an agency was opened in Bermuda, marking the bank’s first international expansion.
As Canada expanded and grew westward, the Merchants Bank of Halifax followed. In 1887, the bank opened a branch in Montréal, then the business centre of Canada, to get involved with larger-scale corporate finance. By the 1890s, the bank had established branches in the Pacific coastal province of British Columbia, which had joined the Confederation back in 1871. During the next decade, branches had also been opened in the Prairie provinces of Manitoba, Saskatchewan and Alberta.
To avoid confusion with the Merchants Bank of Canada and to emphasize its new national focus, the Merchants Bank of Halifax changed its name to The Royal Bank of Canada in 1901. In 1907, the importance of being located in Canada’s financial centre prompted the Royal Bank to relocate its head office to Montréal from Halifax.
Despite its rapid expansion across the country, Royal Bank did not ignore the Caribbean market that was so important to the bank’s early years. The bank opened a branch in Havana in 1899 and an agency in New York in 1900 to facilitate the flourishing sugar and molasses exports from Cuba to America. Between 1903 and 1904, two local Cuban banks were taken over, creating a network of branches. By 1913, Royal Bank’s Caribbean branch network had expanded to Puerto Rico, the Bahamas, Trinidad, Jamaica, Dominican Republic, Belize, Grenada and British Guiana. As the Caribbean trade involved exporting raw materials and commodities to Europe and importing finished products largely from Britain, Royal Bank opened a branch in London in 1910, offering commercial banking and foreign exchange services.
Domestically, Royal Bank also expanded through a series of acquisitions, such as the Union Bank of Halifax (acquired in 1910), Traders Bank of Canada (1912), Quebec Bank (1917) and Union Bank of Canada (1925). By 1925, Royal Bank’s national network numbered 668 branches.
The U.S. Stock Market Crash in 1929 and the subsequent Great Depression, however, hit Canada hard. Slumping asset prices led to prolonged deflation, discouraging consumer spending and delaying business investment, which in turn led to further erosion in employment and consumer confidence. The Royal and other Canadian banks responded by reducing lending and closing branches.
Ironically, the onset of World War II in 1939 lifted the global economy out of the decade-long slump, when wartime production revived industrial output, employment and consumer spending. While Canadian soldiers paid a high toll fighting Germany, Italy and Japan, geographically Canada was never directly attacked or occupied like many other countries. This meant that Canada and the U.S. were not physically devastated like much of Europe and Asia.
After the War ended in 1945, Canada enjoyed a long period of boom. In 1947, oil was discovered in Leduc, Alberta. Royal Bank immediately opened a branch near the well to serve the oilmen. Meanwhile, as part of the national strategy to encourage home building, amendments were made to the National Housing Act and the Bank Act in 1953 permitting banks to offer residential mortgages starting in 1954. The Royal immediately launched its mortgage lending products to secure market share.
The booming 1960s, fuelled by a housing boom as well as an influx of post-war immigrants from Europe, saw Royal Bank launching a number of new products, including the credit card and mutual funds. In 1972, the bank installed its first automated banking machines in Toronto and gradually built an ATM network around the country throughout the 1970s.
The early 1980s were marred by a Third World Debt Crisis that resulted in massive loan losses at many banks around the world. In 1986, Canada’s “Big Bang” (deregulation of the financial industry) came into effect, allowing for the first time since the 1930s commercial banks, securities underwriters, trust companies and insurance companies to cross-sell each other’s products. In 1988, Royal Bank acquired 67% of Dominion Securities Inc., commencing the bank’s investing banking service.
In 1993, Royal Bank acquired The Royal Trust Company for CAD $1.65-billion. Royal Trust had been suffering from massive losses from bad loans made during the real estate bubble of the late 1980s, which burst in 1990. Royal Trust at the time was an associated company of the Reichmann family’s commercial real estate developer Olympia & York, which went bankrupt largely due to the meltdown of its Canary Wharf office development in east London.* By acquiring the ailing Royal Trust, the Royal Bank gained an immediate foothold in the trust and investment custodian markets, as well as 146 retail banking branches.
* Subsequent to Olympia & York's bankruptcy, the creditors took over the Canary Wharf development and restructured its debts. Eventually the global economy and demand for London's class-A office space recovered in the late 1990s. Banking giants HSBC, Barclays, Citigroup Europe, as well as news agency Reuters all moved their headquarters from the City (of London) to Canary Wharf, which has become the new "place to be" for London finance.
- In 1996, Royal Bank bought out the minority shareholders of Dominion Securities Inc., becoming its sole owner.
- In 2000, Royal bought Liberty Life Insurance Co. and Liberty Insurance Services Corp. from Liberty Corp. for USD $650-million.
- In 2001, Royal bought Rocky Mount, North Carolina-based Centura Banks Inc. for USD $2.3-billion., forming RBC Centura Bank. Centura Banks operated 241 branches in North Carolina, South Carolina and Virginia. It had USD $11.5-billion of deposits and 650,000 clients. The Centura purchase was Royal’s first foray into the U.S. retail banking sector.
- Also in 2001, Royal bought U.S. investment bank Dain Rauscher for USD $1.5-billion.
- In 2002, Royal bought another U.S. investment bank Tucker Anthony Sutro for USD $625-million.
- Also in 2002, Royal bought Florida-based Admiralty Bancorp for USD $150-million.
- In 2006, Royal bought Atlanta-based Flag Financial for USD $510-million.
- In 2007, RBC Centura Banks, Inc. bought Birmingham-based Alabama National BanCorporation for USD $1.6-billion. Alabama National BanCorporation was the parent of 11 subsidiary banks with 103 branches in Alabama, Florida and Georgia. With the addition of Alabama National, RBC Centura’s network now consisted of more than 440 locations in the U.S. Southeast.
- In 2007, RBC bought Trinidad and Tobago's RBTT for CAD $ 2.2-billion (USD $2.2-billion).
- In 2007, RBC Centura Bank, the Royal's U.S. retail banking unit, was renamed RBC Bank. In its home market in Canada, the name Royal Bank of Canada continues to be used.
- In 2008, RBC bought Vancouver-based fund manager Phillips Hager & North Investment Management Ltd. for CAD $1.36-billion (USD $ 1.34-billion, Eur 910-million). Phillips Hager & North managed about CAD $69-billion of assets, including about CAD $19.5-billion of mutual fund assets.
- In October 2010, RBC acquired British fixed-income fund manager BlueBay Asset Management plc for GBP 963-million (CAD $1.56-billion, USD $1.55-billion) to bolster its global wealth management business. BlueBay had USD $34.3-billion of assets under management and maintained offices in London, Japan and the U.S.
- Also in October 2010, RBC sold its U.S. insurance unit Liberty Life Insurance Co. to Bermuda-based Athene Holding Ltd. for USD $628-million (CAD $641-million).
- In June 2011, RBC sold its 424-branch U.S. retail division RBC Bank USA and its American credit-card portfolio to PNC Financial for USD $3.615-billion (CAD $3.54-billion). The sale marked the end of RBC's costly 10-year old expansion into the U.S. The sale did not include RBC's U.S. capital market and wealth management operations. Also not included were 180,000 Canadian "snowbirds" accounts in Florida. RBC would book a loss of CAD $1.6-billion from the exit.
- In March 2012, RBC bought Coutts private bank's client accounts in Latin America, the Caribbean and Africa, as well as some of Coutts' staff in Geneva and the Cayman Islands from the Royal Bank of Scotland. The business purchased had client assets of about CAD $2.4-billion (GBP 1.5-billion). Terms of the transaction were not disclosed.
- In April 2012, RBC bought the remaining 50% stake in pension fund administrator RBC Dexia from its co-owner the defunct Dexia Group for CAD $1.1-billion (USD $1.1-billion, Eur 847-million). Interestingly, the press release from the Royal Bank of Canada claimed that the seller was Banque Internationale à Luxembourg (formerly Dexia BIL), but an earlier press release from BIL clearly stated that it did not own any stake of RBC Dexia.
- In October 2012, RBC acquired Ally Financial Inc.'s Canadian auto financing and deposit businesses for between CAD $3.1-billion and $3.8-billion (USD $3.1-billion to $3.8-billion). Excluding the excess capital to be acquired, RBC said the net cost of the purchase would be CAD $1.4-billion. Ally Financial Canada included Ally Credit Canada and ResMor Trust Co. Ally Financial Inc. itself is the former General Motors Acceptance Corp. (GMAC)
- In January 2014, RBC sold its Jamaican banking operations to local rival Sagicor Group Jamaica for an undisclosed amount. RBC's 13 branches in Jamaica are expected to join Sagicor Bank's network of six branches. RBC's Jamaican operations had been losing money for years.
- In January 2015, RBC agreed to buy City National Corp. of Los Angeles for USD $5.4-billion (CAD $6.68-billion). City National and its City National Bank operated 75 branches and 16 regional centres in Southern California, the San Francisco Bay area, Nevada, New York City, Nashville and Atlanta. The private bank served high net-worth clients and professionals and had particular deep ties to Hollywood's entertainment industry. City National had USD $32.6-billion of assets and managed USD $48.1-billion of client assets.
- In July 2015, RBC sold its small Swiss private bank Royal Bank of Canada (Suisse) to local rival SYZ Group. The unit sold manaaged CHF 10-billion (CAD $13.4-billion, USD $10.5-billion) of assets on behalf of its South American, African and Middle Eastern clients. Terms of the sale was not announced.
- In January 2016, RBC agreed to sell its Canadian home, auto, travel and business insurance operations to Aviva Canada for CAD $582-million (GBP 286-million, USD $404-million). Aviva Canada is a wholly-owned subsidiary of Britain's Aviva plc.