In addition to blessedly avoiding the inane “Let’s Twist Again” title of many a recent analyst note…
The rates gang at RBC warned before this week’s FOMC meeting that it would be more complicated this time round for the Fed to continue selling short-term Treasuries and buying long-term ones under Operation Twist. Read more
Who on earth would want to buy a UK stockbroker at the moment?
The sector is blighted by over capacity, low trading volumes, and a lack of investor appetite in new listings. Add to that the rise of direct market access and dark pools and the outlook is truly bleak. Read more
PNC Financial Services Group has agreed to buy the US retail banking operations of Royal Bank of Canada for $3.45bn, reports the WSJ. The deal, involving nearly 430 RBC branches in the US, follows Capital One’s $9bn purchase of ING Direct USA last week and comes as financial institutions seek to shed businesses at the behest of regulators or sell unprofitable or peripheral units. The price represents a small $112m discount to the book value of RBC’s US retail bank of just over $3.5bn. The deal is expected to close in the first quarter. PNC, which beat rival regional bank BB&T for the RBC operations, may pay for the deal in a mix of cash and stock, although the composition will not be known until next year. Meanwhile the FT reports that HSBC is also proceeding with plans to sell part of its US operations, including its upstate New York branches and its US credit card business.
Regional US banks BB&T Corp and PNC Financial Services Group are among lenders that have shown interest in buying Royal Bank of Canada’s US consumer bank, reports Bloomberg, citing people with knowledge of the matter. RBC, which put the loss-making RBC Bank unit up for sale this year, is seeking to sell the business for stock rather than cash. RBC Bank, based in North Carolina, may fetch as much as $3.7bn, according to bank analysts. Toronto-based RBC is being advised by JPMorgan on the potential sale.
Royal Bank of Canada lost its Moody’s triple-A credit rating on Monday, leaving its smaller rival Toronto-Dominion as the only Canadian bank — and one of less than half a dozen worldwide — to retain top ranking, reports the FT. In cutting the rating to Aa1, Moody’s cited concerns about RBC’s growing international capital markets business which, it said, “poses significant risk challenges”. Nevertheless, said Moody’s senior vice-president Peter Nerby, the bank still “enjoys one of the highest ratings globally among banks with substantial capital markets operations”. The Telegraph adds that Moody’s warnings echo growing concerns among investors about risks taken by investment banking divisions to attain the higher returns that make them attractive to banks.
Royal Bank of Canada has struck a £963m ($1.5bn) deal to buy BlueBay Asset Management, reports the FT. London-listed BlueBay’s shares jumped by 30% on news of RBC’s 485p per share offer, capping a turbulent year for the UK bond and fixed income asset manager and netting millions for its founders Hugh Willis and Mark Poole. At a a 29.1% premium to BlueBay’s Friday closing price the deal will hand Willis, chief executive, and Poole, chief investment officer, a windfall of £81m each from their 8.5% stakes only months after they each sold £21m of shares into the market. After number-crunching, Lex notes that the price is not a particularly high premium to pay for control of BlueBay and its ‘rarity value’.
Royal Bank of Canada is seeking a buyer for most of its US life-insurance arm, a decade after it acquired the unit for $650m in an ambitious push into the US financial services market, says the FT. The bank has been working with Goldman Sachs for several months on selling the South Carolina-based unit, which trades as RBC Insurance but is registered as Liberty Life Insurance, say people familiar with the matter. Bloomberg adds that the sale is likely to fetch less than $1bn.
Clive Cowdery is back in the limelight, as the insurance entrepreneur’s Resolution Group confirmed talks to buy part of Axa’s UK business for about £2.8bn.
Resolution shares have been suspended from trading on the London Stock Exchange on Monday ahead of a more detailed announcement, following the group’s statement, as follows (our emphasis): Read more
China’s leaders have long been known for their pragmatically mysterious sayings, FT Alphaville observes – and ‘the renminbi is basically stable’ counts as one of them. China’s 2005 revaluation shows that the phrase can mean anything China wants it to mean – useful to know, amid the current debate on the country’s currency. Read more
Canada’s five big banks have reported robust first-quarter earnings driven by growth in mortgage lending and other domestic business. The five – Royal Bank of Canada, Toronto-Dominion, Bank of Nova Scotia, Bank of Montreal and Canadian Imperial Bank of Commerce –reported combined quarterly net income of C$5bn ($4.9bn), up more than two-thirds from 2009. None had a return on equity below 14%. Bank of Nova Scotia, the last of the five to report, on Tuesday said net income grew by 17% yoy to C$988m in the three months to Jan 31.
Royal Bank of Canada has indicated it could spend more than C$1bn ($965m) on share buy-backs, underlining the contrasting financial health of Canada’s banks and many US and European counterparts. Canadian banks have built a sizeable capital cushion over the past 18 months through retained earnings and new equity and preferred-share issues. RBC said late on Friday that it intended to buy back up to 20m common shares, equal to 1.4% of the total outstanding.
From the SEC:
Washington, D.C., June 3, 2009 – The Securities and Exchange Commission today announced finalized settlements with Bank of America, RBC Capital Markets, and Deutsche Bank to resolve SEC charges that the firms misled investors regarding the liquidity risks associated with auction rate securities (ARS) that they underwrote, marketed, or sold. Read more
The scenarios contained in the US banking stress tests have been much criticised. Now, the type of capital used in the SCAP is coming under scrutiny.
This from RBC Capital Markets’ Gerard Cassidy: Read more
More than 1,000 US banks, or one in eight lenders, may fail in the next three to five years as commercial loan losses rise, compounding problems from record mortgage delinquencies and soaring home equity loan defaults, according to RBC Capital Markets, reports Reuters. That rate of failures would recall the height of the savings and loan collapse, when 1,386 lenders failed from 1988 to 1990, according to FDIC data. RBC had previously said 200 to 300 lenders might fail over three years. It said most failures will occur at banks with less than $2bn of assets.
The great British banking collapse continues apace.
Barclays led the charge this morning; off 33 per cent at one point. Lloyds too was a disaster, previously down 19 per cent. Read more
A couple of inconvenient facts:
- The FSA ban on shorting financials does not prohibit analysts from saying “Sell.” Read more
Royal Bank of Canada is shrugging off the slump in the debt markets by opening a European leveraged finance business in London. RBC Capital Markets, the bank’s corporate and investment banking division, has appointed Nick Atkinson, Warrick Booth, Paul Brady and John Williams as directors to establish the business and is likely to make up to 15 more appointments in the near future. RBC already has a leveraged finance business in North America and an infrastructure finance business in Europe, which it will use to develop its European leveraged loan business.
Toronto-Dominion Bank said Tuesday it would buy US bank Commerce Bancorp for $8.5bn in stock and cash. The move doubles the Canadian bank’s presence in the US and underscores the power of the soaring Canadian dollar. The deal came the same day that Royal Bank of Canada, one of TD’s main rivals, said it would buy RBTT Financial, a Trinidadian bank, for $2.2bn, its ninth acquisition outside its home country this year. Lex says that while risky, the Commerce acquisition is an “exciting move” for TD – it is earnings-dilutive but is a good cultural fit, although it presents big cost-cutting challenges.