Royal Bank of Canada is on the lookout for acquisitions but will likely wait until there is more clarity on regulatory changes before striking, its chief executive said on July 13.
"Strong banks will get stronger and weak banks will be pressured to restructure. This suggests an area of opportunity for potential acquisitions, but not until we have a clear line of sight on assets and clarity on regulation," Gordon Nixon, president and chief executive of RBC, said in a speech at the British Bankers' Association (BBA) annual conference.
"Given the regulatory uncertainty it is very difficult to deploy capital because you just don't know what the cost of capital and returns of capital are. So we will continue to be very cautious in terms of expansion," he told Reuters in an interview afterwards.
Nixon said he was keen for RBC to continue to expand in Europe and London, particularly in capital markets and wealth management businesses.
"If there was an opportunity in the wealth management area to expand more quickly we would certainly welcome it and the UK and Europe would be a priority," he said, citing more clarity on rules and regulations affecting wealth and asset management.
Nixon said no deals were imminent, and any acquisitions were more likely to be "add-ons" to fill gaps than transformational.
RBC, Canada's biggest bank, and its domestic peers are more strongly capitalised and fared better than most global rivals during the financial crisis and several are now seeking to take advantage of their competitive position.
"There will be a long-term restructuring in the industry as banks make decisions around their business mix," Nixon told Reuters, citing pressure on banks "to ensure that marginal capital is deployed efficiently" and make decisions on which businesses to focus on.
"I think it will force a lot of restructuring and that could go on for years, not months."
Nixon said he also wants to expand RBC Capital Markets, after the bank said last month it would consider buying a London-based boutique investment bank to speed expansion. It has hired 140 people in Europe since November and said it planned to add 75 more.
He said over-regulation could hurt the economic recovery and urged global regulators to rethink plans to reform capital and other measures.
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