Royal Bank of Canada's (RBC) plans to increase its market share in the US investment banking market will include bolstering its structured notes business, with the Canadian bank targeting private banking and institutional clients as it capitalises on the retreat of a number of European banks, including Credit Suisse, Deutsche Bank, and Barclays.
"RBC Capital Markets is committed to investing in the US structured notes market," said Ahmed Kachenoura (pictured), managing director and head of global equity linked products, RBC Capital Markets. "We credit our success to our 'client first' culture, our excellent service, the quality of our credit, and the dedication of our employees."
Last week, Blair Fleming, head of RBC Capital Markets in the US, told Reuters that Canadian banks are expanding their profile in the US capital markets on the back of a number of European banks scaling down their investment banking activities.
"We've got strong momentum," said Fleming. "Some banks are having difficulties, and we're well-positioned to capitalize on opportunities that arise. We feel we can take market share from 3% to 3.5% to 4%."
RBC is already appearing in the US top ten investment banking rankings, and is the most active Canadian bank in the US structured notes market. SRP data also shows that the Canadian bank was the tenth most active provider of structured notes in the US with a 4% market share and US$1.9bn in sales in 2015. Year to date, RBC has issued 108 products worth US$408m.
As the Canadian market becomes fairly saturated, the United States has become pivotal to the bank's global strategy which included beefing up investments in the US market since the financial crisis, according to Fleming.
The bank's capital markets revenue and net income is the United States account for 60% of its business, while capital markets revenue in the US is double the capital markets revenue from Canada.
Despite the Canadian bank's ambitions in the US market, Fleming said although the goal is to grow its market share, the bank is not seeking a top 5 position. "Breaking into the top 5 would require a lot of capital and taking significant risk - this isn't something we aspire to," said Fleming. "Overall 7 to 10 is a reasonable spot for us to occupy."
However, RBC is seeking to bolster the return on equity of its investment banking division and capitalise on the recent $5 billion acquisition of City National, a Los Angeles-based bank focusing on high-net worth clients.
As part of this strategy, RBC capital markets is also increasing its profile in the US exchange-traded products (ETP) market and became a lead market maker (LMM) on NYSE Arca, in March, in a move to deepen the pool of liquidity for exchange traded products (ETPs).
RBC's plans will face competition from other Canadian banks active in the US structured notes market including BMO Financial which sold US$386m across 286 products; TD Bank which sold US$183m across 50 products; as well as CIBC and Scotia Bank which have a marginal role in the US structured notes market.
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