Royal Bank of Canada to Merge with City National Corporation
The Royal Bank of Canada (RBC) has inked a $5.4 billion merger with Los Angeles-based City National Corporation in a deal that marks the latest move by Canada’s major bank to expand its financial services footprint in the U.S. RBC has said that it plans to combine its U.S. wealth management unit with City National after the deal closes. The Canadian lender has 8,000 employees in the U.S., including more than 3,000 in New York.
“This is a very strategic decision by the Royal Bank of Canada to expand into Los Angeles,” says Walter Mix, the head of the Financial Services practice at the Berkeley Research Group and a former commissioner of the California Department of Financial Institutions. The merger, says Mix, “represents a tremendous economic opportunities in trade, technology, manufacturing and others sectors. This is a marriage of one of the world’s strongest banks with a strong LA franchise. It will also help Los Angeles, as it increases credit availability in the city.
Toronto, Canada-headquartered RBC says the transaction is expected to add to its earnings in the second year after the closure of the deal, which is likely in the fourth quarter of this year. City National, based in Los Angeles, serves clients across several large U.S. metropolitan areas, including Los Angeles, Orange County, the San Francisco Bay Area, New York and Washington, D.C.
That footprint could expand, according to reports in the financial media that say RBC CEO Dave McKay has signalled plans for the California bank opening branches in Texas. RBC’s strength in the energy sector will be an important area of growth for City National, McKay said, making Texas high on the list for geographic expansion. He added that the bank will do more jumbo-mortgage lending in Houston and elsewhere after the acquisition closes.
The RBC-City National merger is the Canadian bank’s fourth foray into the U.S. banking sector. In 1998, RBC acquired Security First Network Bank of Atlanta, Georgia, the first “pure Internet” bank. In 2000, it acquired Dain Rauscher Wessels, a Minnesota-based brokerage and banking investment firm and, the following year, bought the Centura Bank of Rocky Mount, North Carolina, which it later sold for $3.62 billion in the wake of the financial crisis.