Royal Bank of Canada (RBC) announces plans of launching a consumer bank in the U.S

In an announcement on Friday, the Royal Bank of Canada (RBC) announced plans of launching a consumer bank in the U.S that will primarily target the wealthier clients. As per the CFO, the move scheduled for next year will help the Canadian central bank to expand its deposits.

The CFO further commented that the RBC now wishes to replicate the same services in the U.S that it has in Canada. While the bank will focus on high net-worth U.S clients in the beginning, its products and services will later be open for all classes of potential customers.

RBC’s City National Bank Accounts For 23% Of The Total Revenue

A similar move was previously adopted by the U.S based rivals like the Bank of America that also underwent expansion via launching private banking arms. RBC’s business in the United States that also includes its 2015 acquisition of City National Bank currently contributes 23% to the total revenue, as per its latest quarterly performance report.

The report further added that RBC’s wealth management business saw a 4% increase in its profit as compared to the same quarter last year. The aforementioned segment accounted for 20% of the central bank’s total earnings.

CEO David McKay also commented on the recent news and highlighted that the bank’s loan book is currently expanding at a faster pace as compared to that of deposit book. Ensuring growth in deposit with the new consumer bank, he added, will prove to be effective for the bank’s long-term goals.

RBC’s new strategy, as per the CEO, will use the client-centric approach rather than a commercial driven strategy. CFO Rod Bolger, however, chose to not divulge any further information about the size of the to-be-launched consumer bank or the costs involved at this stage.

RBC Executives Express Confidence That Margin Will Compress In 2020

RBC’s upbeat performance in the recent quarter was largely attributed to the capital markets that generated higher revenue from dealmaking and bond trading. In light of the geopolitical tensions including the recent outbreak of Coronavirus in China, however, the bank said its revenue from dealmaking may take a hit in the upcoming quarters.

Last year weighed heavily on RBC’s financial performance that came out to be the worst in terms of earnings growth. For fiscal 2020, RBC executives expressed concerns that the bank’s margin may also compress amidst the health emergency in China.

RBC gained 1% in the stock market on Friday and was last seen trading at C$109.07. At C$3.51 billion, RBC’s net income saw an 11% increase.