RBC Dexia eyes faster Asia growth post-acquisition
RBC Dexia Investor Services expects to see quicker expansion into new markets in Asia now that Royal Bank of Canada has agreed to buy the 50% it does not already own in the joint venture.
Even before last week's announcement about the acquisition, the asset-servicing group had formulated plans to move into new markets in the region and had discussed potential synergies with its parent.
The sole ownership by the Canadian group will enable RBC Dexia to leverage RBC’s existing presence and operations in Asian markets, says Brent Reuter, managing director for RBC Dexia Hong Kong. "RBC is a strong, stable Canadian brand that will resonant well in the market place," he notes, "particularly in places like China."
RBC already has a branch in Beijing with two representative offices selling offshore, non-renminbi wealth management and insurance services; it does not yet have a licence to offer RMB banking services onshore. The firm's mainland Chinese clients are serviced by onshore and offshore client representatives in markets such as Hong Kong and Singapore. RBC Dexia also has regional presences in Australia and Malaysia.
“We definitely see some synergies not only with RBC’s wealth management, but across its asset management and capital markets group,” says Reuter. "These businesses of RBC operate in segments we would like to grow in, specifically in the sovereign wealth space."
He points to RBC’s capital markets business, noting its sizeable trading desks operating in several Asian markets. Once the transaction is complete, Reuter says RBC Dexia could derive "significant synergies" with the bank's capital markets capabilities, such as its strong equities trading desk.
Reuter says he expects that upon closure of the deal, the company will be renamed in a way that "will more accurately reflect the change in parental ownership", but stopped short of giving more details.
The €837.5 million ($1.1 billion) cash deal is expected to complete in mid-2012, pending regulatory approvals. It comes after substantial speculation about the likely fate of the troubled Franco-Belgian banking group, following government bailouts and the offering for sale of its healthier offshore businesses, such as RBC Dexia.
RBC Dexia had net income of €123 million for the year to December 31, and its book value stood at €1.7 billion. RBC expects the full acquisition to be “moderately accretive to earnings in 2013”.