May 8 (Bloomberg) -- Royal Bank of Canada, known for its “RBC nice” culture, is considering a second run at U.S. consumer banking after failing in its last effort, this time as an attacker using new technology.
“We would certainly look at returning to the U.S.,” Chief Executive Officer Gordon Nixon said in a May 6 interview in Toronto. “What we’d like to do is see whether there are opportunities for us to be more of an attacker in a marketplace where we don’t have an embedded business.”
Royal Bank seeks to incorporate some of the practices of technology firms, which are starting to encroach on turf traditionally controlled by banks. JPMorgan Chase & Co. CEO Jamie Dimon said at a May 6 Euromoney Saudi Arabia conference in Riyadh that he sees challenges from companies such as Facebook Inc. (FB) and Google Inc. (GOOG) as they show interest in providing online banking and money-lending services.
“We’ve had a lot of discussions with the likes of Facebook and Google and organizations like that,” Nixon, 57, said. “We’re looking to expand in the payments world, but don’t necessarily want to get into the banking world.”
Royal Bank, Canada’s second-largest lender by assets, hasn’t zeroed in on a specific area, though it has looked at areas involving payment and other financial services, credit, wealth management and private banking for wealthy clients, said Nixon, who will retire Aug. 1 and be succeeded by President David McKay.
The firm has harnessed technology to drive change in other areas of banking. Its RBC Capital Markets unit developed software designed to protect against high-frequency traders using speed as an advantage, becoming a standard-bearer for a revolt among investors against the Wall Street practice. RBC and former employee Brad Katsuyama, now CEO of the upstart IEX Group Inc. alternative stock market in the U.S., were profiled in Michael Lewis’s book “Flash Boys,” which described the bank as fostering an “RBC nice” culture.
Royal Bank (RY), which also has a wealth-management unit in the U.S., has spent “a lot of time” studying the banking industry to anticipate changes driven by new technology and evolving payment systems, Nixon said. The U.S. wealth-management business has about $260 billion of assets under administration, according to the firm’s website.
“There are going to be opportunities for new models, new technologies, new ideas and new ways of servicing customers,” Nixon said. “We’d rather be on that side of the equation than sitting there trying to defend the traditional business of a bread-and-butter bank.”
Royal Bank spent more than $4.6 billion over a decade trying to make inroads into U.S. retail banking starting with its 2001 purchase of Centura Banks. The firm cut its losses in March 2012 when it sold its money-losing North Carolina-based RBC Bank and credit-card assets to PNC Financial Services Group Inc. for $3.62 billion.
The company’s strategy won’t involve a return to “bricks-and-mortar” banking in the U.S., according to Nixon.
“A bank that takes in deposits and lends out money to commercial customers or into the real estate market is not a model for the future,” he said. “So if we did anything, it’d be much more of a new model.”
To generate strong returns in the U.S., a bank needs to be a major regional player with fully integrated offerings that can be cross-sold, or differentiate themselves by being a specialized provider of banking, wealth management or technology services, Nixon said.
McKay, 50, previously Royal Bank’s head of personal and commercial banking, said in a January 2013 interview that he’s seeking ways to re-enter the U.S. consumer-lending business through acquisitions and partnerships in payment systems and expanding its Internet bank.
Nixon said buying another consumer lender would force the bank to resist encroaching technological changes, a position they don’t want to be in.
“If we were to buy a traditional or a bigger retail bank in the U.S., we automatically become a defender,” he said.
To contact the reporter on this story: Doug Alexander in Toronto at firstname.lastname@example.org