RBC Said to Be Lead Bidder to Buy Ally’s Canada Unit

Royal Bank of Canada, the nation’s largest lender by assets, is nearing a deal to buy the Canadian operations of Ally Financial Inc. (ALLY), according to two people briefed on the negotiations.

Talks are in an advanced stage, said the people, who requested anonymity because the discussions are private. Ally’s Canadian business, which includes auto finance, insurance and deposits, held $15.3 billion in assets as of March 31, according to a May 15 presentation.

Royal Bank Chief Executive Officer Gordon Nixon, 55, has said the lender would explore “strategic acquisitions” amid a slowdown in Canadian consumer lending. Ally put its non-U.S. operations up for sale in May to help repay a $17.2 billion bailout that left taxpayers with a 74 percent stake.

RBC may pay more than $4 billion, CNBC reported earlier today, citing unidentified people familiar with the matter. That would make the deal the largest takeover ever for Royal Bank, eclipsing a $2.16 billion purchase of Centura Banks in 2001. Toronto-Dominion Bank (TD) also is bidding, CNBC said.

Katherine Gay, a spokeswoman for Toronto-based RBC, said she couldn’t comment, as did Gina Proia at Detroit-based Ally and Toronto-Dominion’s Stephen Knight.

Royal Bank posted a record C$1.13 billion ($1.14 billion) profit at its domestic-banking unit in the fiscal third quarter, fueled by increasing deposits, mortgages and loans.

Toronto-Dominion

Second-quarter net income at Ally’s Canadian operations fell 18 percent to $80 million from a year earlier, the company said in a regulatory filing. Revenue for the three months ended June 30 slid 27 percent to $179 million. Royal Bank said profit for the third quarter ended July 31 rose 73 percent to C$2.24 billion from a year earlier as total revenue climbed 12 percent to C$7.76 billion.

Royal Bank and Toronto-Dominion had shown interest in Ally’s Canadian operations, a person with knowledge of the matter told Bloomberg News last month.

The transaction would follow a proposed takeover by Toronto-based Bank of Nova Scotia, which offered in August to buy the Canadian banking operations of ING Groep NV (INGA) for C$3.1 billion.

To contact the reporters on this story: Zachary R. Mider in New York at zmider1@bloomberg.net; Dakin Campbell in San Francisco at dcampbell27@bloomberg.net; Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net David Scanlan at dscanlan@bloomberg.net; David Scheer at +1-212-617-2358 or dscheer@bloomberg.net

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