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00:00SWITZERLAND. LET'S GET YOUR REACTION. THE END OF BOOM BUST AS WE KNOW IT. BRIDGEWATER SAID THAT IN THAT CHAIR. YOUR VIEW? DAVE: CERTAINLY WE GO THROUGH CREDIT CYCLES. MY VIEW IS WE HAVE A NUMBER OF QUARTERS OF SOLID GROWTH IN OUR CORE MARKET IN FRONT OF US. WE ARE INVESTING FOR GROWTH IN THE UNITED STATES, WE ARE INVESTING FOR GROWTH IN CANADA, AND WE ARE IN A HOLDING PATTERN IN EUROPE. WE ARE SEEING BETTER PERFORMANCE. FOR US WE ARE SEEING A DECENT CYCLE WHERE INVESTING FOR GROWTH AND WE HAVE A MONETARY SITUATION, NOT A LOT OF STIMULUS LEFT. THEREFORE FISCAL STIMULUS WILL MANAGE THOSE CYCLES. TOM: YOU HAVE A MORE INFORMED VIEW WITH THE ROMANCE OF THE RAIL SYSTEM IN CANADA AND COMMODITIES ENDING UP IN VANCOUVER AND ALL OF THAT ENDING UP IN CHINA. WHAT DID THE BANKS IN CANADA SAY ABOUT THE DYNAMICS OF CHINA? DAVE: WE HAVE HAD A MORE CHALLENGING YEAR WITH THE CHINA/CANADIAN RELATIONSHIP. WE HAVE STARTED TO REVERSE COURSE AND CHINA IS PURCHASING MORE AGRICULTURAL COMMODITIES. WE ARE SEEING A RETURN TO MORE GROWTH AND THE EXPORT OF OUR AGRICULTURAL COMMODITIES, OUR STRATEGY IS TO FOCUS ON PLANT-BASED PROTEIN, TO USE OUR LAND, TO USE OUR WATER, TO USE OR ACCESS TO THOSE MARKETS. I SEE LONG-TERM GROWTH FROM THAT . AS FAR AS ENERGY COMMODITIES, CERTAINLY DRIVEN BY THE STRENGTH OF THE CHINESE ECONOMY. TRADE TENGION HAS AN IMPACT. JONATHAN: ANY PRESSURE ON FINANCING SOME OF THE OIL OR COAL FIRMS IN CANADA? HAS THAT COME UP IN THESE MEETINGS? DAVE: ABSOLUTELY. JONATHAN: WHAT YOU SAY BACK TO THEM? DAVE: WE ARE IN A TRANSITION. WE HAVE A LONGER-TERM TRANSITION AS WE CHANGE THE ENERGY SOURCE AND MOVE TO A GREENER ECONOMY. IT IS A TRANSITION. TO MAKE THE TRANSITION AND HAVE THE TAX BASE AND THE CASH FLOWS AND THE STRONG ECONOMY TO MAKE THE TRANSITION, YOU NEED FOSSIL-BASED FUELS TO MAKE THE TRANSITION. THEY ARE NOT GOING AWAY OVERNIGHT. A LOT OF THE ANGER AND THE CALLS FOR IMMEDIATE STOPS ON INVESTMENT IN FOSSIL FUELS MEANS WE HAVE NOT ARTICULATED A PLAN TO GET TO THE PARIS ACCORD, TO GET TO NET ZERO 2050. WE HAVE NOT DONE IT AS A COUNTRY. WHAT WE ARE MISSING IS AN ARTICULATION OF A PLAN TO REPLACE FOSSIL FUELS, HALF THE DEBATE, BUT WE STILL GOING TO NEED THE FOSSIL FUELS TO MAKE THE TRANSITION. EVERYBODY KNOWS WE ARE NOT MAKING THE TRANSITION OVERNIGHT. WE HAVE TO INVEST. OTHERWISE YOU WILL SEAT $150 OIL PRICES, AND THAT IS MORE DESTABILIZING TO OUR GLOBAL ECONOMY THEN YOU WOULD EXPECT. TOM: I COME UP WITH A THEME ON THE SECOND DAY OF DAVOS. AS THE ENERGY BUSINESS, AND I THINK OF THE ANADARKO SPLIT UP IN AMERICA, FROM YOUR VIEW WITH THE ROYAL BANK OF CANADA, IS IT AN INDUSTRY WHERE IT COULD BE BOOM COMING OFF OF A TERRIBLE BOTTOM, OR IS IT JUST SURVIVAL FOR NOT ONLY CANADIAN ENERGY BUT GLOBAL ENERGY? DAVE: A GREAT QUESTION. THERE IS A LOT OF MIXED SIGNALING FROM CAPITAL MARKETS AND INVESTORS INTO THE ENERGY SECTORS. YOU ARE SEEING MIDSIZED AND SMALLER FIRMS STARTING TO HOARD CASH. THEY ARE NOT SURE THEY WILL OF ACCESS TO CAPITAL THE DRILL. YOU ARE SEEING A VERY DIFFERENT STOP BUYING BACK SHARES, WATCHING INVESTMENTS CAREFULLY. PLANS TO LOWER THE ENERGY FOOTPRINT TO PRODUCE ENERGY, THEY ARE MORE CONFIDENT THEY WILL HAVE ACCESS TO CAPITAL MARKETS. WE HAVE TO COME TOGETHER, PUBLIC AND PRIVATE SECTOR, TO ARTICULATE THE PATH FORWARD SO THE SECTOR CAN ATTRACT CAPITAL. OTHERWISE YOU WILL SEE A WIDE RANGE OF CAPITAL STRATEGIES IN THE SECTOR. JONATHAN: SPEAKING OF THE COMMODITY BUSINESS, WHETHER MINING OR ENERGY, THE C-SUITE HAS BEEN FOCUSED ON VALUE OVERGROWTH. IN THE FINANCIAL SECTOR, THERE SEEMS TO BE A MASSIVE PUSH FOR SCALE. NOT NECESSARILY JUST VALUE. WHAT IS YOUR STRATEGIC VISION WITH SCALE IN MIND? DAVE: THE SCALE GAME IS CHANGING. WE HAVE COMPETED THE LAST 20 YEARS ON DOMESTIC SCALE. YOU HAVE DOMESTIC SCALE IN EACH OF YOUR CORE INDUSTRIES, BANKING OR MANUFACTURING. WHEN YOU ARE SERVING A CLIENT BASE DOMESTICALLY, THAT STEER -- THAT SCALE TRANSLATES INTO MARKET SHARE. WHAT I HAVE TAKEN AWAY FROM DAVOS 2020 IS THAT GLOBAL SCALE IS TAKING OVER. GLOBAL SCALE IN DATA, GLOBAL SCALE AND CLIENT FRANCHISE, GLOBAL SCALE IN MANUFACTURING. FOR A SMALLER COUNTRY LIKE CANADA, HOW IS RBC PARTNERSHIPS TO CREATE DATA SCALE. HOW DO WE EXPAND OUR VALUE PROPOSITIONS? WE ARE ON THIS PATH BEFORE IN REDEFINING OUR BUSINESS MODEL. I AM LEAVING WITH A GREATER SENSE OF URGENCY AND A GREATER SENSE TO PARTNER TO CREATE GLOBAL SCALE. THOSE ARE THE CONVERSATIONS I'VE BEEN HAVING WITH THE NUMBER OF PARTNERS IN DAVOS.

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RBC's McKay Sees 'Decent Cycle Ahead' for Growth

Royal Bank of Canada Chief Executive Officer Dave McKay discusses the macroeconomic environment and the fight against climate change. He speaks with Bloomberg’s Jonathan Ferro and Tom Keene at the World Economic Forum’s annual meeting in Davos, Switzerland on "Bloomberg The Open." (Source: Bloomberg)

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