Royal Bank eyes U.S. expansion

Royal Bank of Canada is interested in U.S. banks with US$10-billion in assets or more to add to its consumer lending business, said James Westlake, an executive who oversees the international unit.

Canada’s biggest bank won’t pursue takeovers to add to its Raleigh, N.C.-based RBC Bank business until the political and regulatory uncertainty ends, Mr. Westlake said yesterday in an interview after talking to the North Carolina Bankers Association in Greensboro.

“Until we see the rules of engagement, it wouldn’t make sense for us to spend another billion dollars buying banks,” he said.

Mr. Westlake wouldn’t say what banks he’d be interested in buying. Lenders in RBC Bank’s operating region that fall within the range for assets include United Community Banks Inc., a company based in Blairsville, Ga,, with a market value of US$401-million. South Financial Group Inc., is a Greenville, S.C.-based lender valued at US$159-million.

“You have companies that are still coming out of a near death experience, so I really think Royal Bank has the pick of the litter,” said Chris Marinac, an analyst at FIG Partners LLC in Atlanta. “This should be a buyer’s market.”

Regulators are shutting U.S. banks at the fastest pace in 17 years amid losses tied to real estate, and are seeking buyers to take over deposits and loans portfolios. Gordon Nixon, Royal Bank chief executive, has said he’ll be “cautious” about U.S. takeovers as long as there’s uncertainty over regulations and the economy.

Royal Bank halted takeovers of U.S. banks after closing its US$1.6-billion takeover of Alabama National BanCorporation in February 2008. The Toronto-based bank entered the U.S. consumer banking market in 2001 after buying Centura Banks for US$2.1-billion. Royal Bank expanded by taking over Atlanta-based Flag Financial in 2006, and 39 branches from AmSouth Bancorp a year later.

U.S. officials are showing more acceptance of foreign bank offers to acquire troubled U.S. assets after initially restricting purchases to U.S. buyers, Mr. Westlake said.

“Most of the deals we are seeing are 12 branches or 25 branches and they don’t really move the needle,” he said. “But I wouldn’t detect anything that suggests we aren’t welcome.”

U.S. lawmakers are working to rewrite financial-industry regulations after the federal government’s US$700-billion bank bailout.

Royal Bank opposes tougher U.S. regulations that mainly penalize banks, Mr. Westlake said.

“We’re fine with a consumer protection agency, unless the focus is on beating the heck out of the banks with punitive rules,” he said. “Let’s not be punitive, let’s not set silly rules.”

Royal Bank has been reorganizing RBC Bank after taking a $1-billion (US$970- million) writedown on the business in April. Real-estate loan losses in RBC Bank’s main markets in the U.S. southeast are bottoming out, Mr. Westlake said, though high unemployment and declining values of commercial real-estate properties remain concerns.

“Unemployment has been a lot nastier than a lot of people expected,” he said.

Bloomberg.com