RBC’s Nixon Says ‘Transformational’ Purchases Hard to Do

Gordon Nixon, chief executive officer of Royal Bank of Canada, said he doesn’t expect the bank to make many “transformational” acquisitions.

Nixon said regulatory hurdles and “the overall marketplace” will make it more difficult for Canada’s biggest bank by assets to achieve the same pace of acquisitions it did from 2000 to 2008.

“We will still look at making acquisitions that we view as strategic,” Nixon, 55, said today at the Bloomberg Canada Economic Summit in Toronto.

Canada’s six-largest lenders have spent about $40 billion worldwide buying bank assets in the past five years, taking advantage of their relative strength. Some global banks, weakened by a financial slump and European sovereign debt crisis, have been forced to sell businesses to meet higher capital requirements under new global banking rules.

Nixon also said a downgrade by Moody’s Investors Service “would not have a material impact” on being able to arrange financing for clients.

Moody’s said Feb. 15 it may cut Royal Bank’s credit rating as much as two levels, as part of a review of 17 global banks and securities firms. Moody’s put the ratings of the 17 firms under review in February because the companies “face challenges that are not fully captured in their current rankings.”

Less Rhetoric

Nixon also said Canada’s real estate and housing markets are in “reasonable shape” and he’d like to see less “rhetoric” on a market correction.

“We feel pretty good about the housing market,” Nixon said. “When we look at the overall marketplace, there might be pockets of vulnerability but we remain quite comfortable.”

Nixon also said people still have the ability to make mortgage payments, despite historically high consumer debt levels, as long as the Bank of Canada maintains balanced policies.

“As long as interest rates are low they can service those levels, but if you start to get a significant increase in interest rates, or increasing in things like unemployment, it wouldn’t be a good thing,” Nixon said. “I think ensuring that the appropriate balance is kept in check is good policy.”

To contact the reporters on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net; Sean B. Pasternak in Toronto at spasternak@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; David Scanlan at dscanlan@bloomberg.net

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