RBC’s City National Puts London on Back Burner to Focus on U.S.by
City National’s Goldsmith sees better opportunities in U.S.
‘Bank to the Stars’ CEO expects to hire 400 people this year
City National Bank, the California lender bought by Royal Bank of Canada in November, is holding off on a plan to enter the U.K. to focus on U.S. expansion, Chief Executive Officer Russell Goldsmith said.
City National last year said it had ambitions of becoming a “premier entertainment bank in the English-speaking world," with a London office backed by its Canadian owner. Instead, Royal Bank’s RBC Capital Markets and wealth-management businesses are creating opportunities for the Los Angeles-based firm to enter new markets in the U.S. and Canada, Goldsmith said.
“What we’ve tried to do is narrow our focus on the United States, as the opportunities there are so robust and more easily achievable,” Goldsmith, 66, said Thursday in a phone interview from Toronto. “Those are just much more attractive and interesting opportunities rather than trying to venture across the pond.”
Royal Bank acquired the private and commercial bank in a $5 billion cash-and-stock deal, its largest takeover ever. Known as the “bank to the stars" for its ties to Hollywood celebrities, City National generated C$937 million ($726 million) of revenue and contributed C$215 million before amortization and integration costs to Royal Bank’s earnings in the first half of the fiscal year, surpassing the parent company’s expectations. The lender is expected to add C$350 million in earnings for 2016, Royal Bank Chief Financial Officer Janice Fukakusa said Friday on an investor call.
Royal Bank is targeting annual balance-sheet growth of more than 10 percent for City National through 2020, with more than $1 billion in annual pretax profit by that year, RBC said Friday in an investor day web presentation. Royal Bank CEO David McKay said in April he expects City National to help the Canadian lender double its $1 billion of annual earnings from U.S. businesses within seven years.
“It’s a nice tack-on business and they’ll be able to get some scale out of this,” Craig Fehr, an investment strategist at Edward Jones, said in a phone interview, adding that California was “a pretty good place to go in terms of private wealth.”
City National, which has long focused on show-business clientele, was founded in 1954. It expanded to Nashville and Atlanta in 2011 to target the music industry and in 2013 opened ground-floor bank branches in New York to gain visibility in a city where many Hollywood clients work and live. A City National office will open in lower Manhattan on Vesey Street in August, McKay said.
City National is already getting new clients and business from referrals by Royal Bank’s wealth-management business, according to Goldsmith and McKay. Early efforts to boost referrals between RBC’s wealth offices and City National branches in Beverly Hills and San Diego County in California generated “several hundred referrals, millions of dollars in loans and deposits," Goldsmith said.
The bank is hiring of bankers, business development officers, sales people and compliance personnel to prepare for growth, Goldsmith said.
“Last year City National hired more people -- net hires -- than we ever hired in our history as we anticipated and prepared for the merger," Goldsmith said. The firm, which has about 3,600 employees, expects to add more than 400 people this fiscal year, he said.
“The reaction among potential hires and potential clients has been extraordinarily positive, and you can see that in our hiring numbers and in our growth numbers," Goldsmith said.