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Royal Bank of Canada Eyes Bolder Appearance In The US Investment Banking Market

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March 8
5:08 AM 2016

Royal Bank of Canada (RBC), is planning to increase its share in the US investment banking market. The largest financial institute of Canada intends to avail of the opportunities with existing mid-sized and large clients and filling gaps left by the back scaling European banks.

Deutsche Bank, Barclays Plc, Credit Suisse and other European banks have been reducing their investment banking portfolios in the US market. In some cases, the banks have been opting for less aggressive roles in the deal flow. Meanwhile, the Canadian banks have been expanding their presence in US capital market, reports Reuters.

Last year, even an US investment bank, Morgan Stanley, has announced planning for up to 25% job cut in its fixed income division. RBC has been witnessing huge momentum while some banks in the US are facing difficulties in continuing business, reports The News International quoting Blair Fleming, head of RBC Capital Markets in the United States.

The largest bank in Canada has also been capable of penetrating into the list of top ten investment banks in the US. RBC has provided advisory service to Dell Inc's $24.4 billion deal going private in 2013 and leveraged buyout of US security company ADT Corp by private equity firm Apollo Global Management LLC this year, according to a report published in the New Day Post.

RBC has strengthened its US investment arm during continuation of the financial crisis. The Canadian bank has been witnessing benefit of that push since the brand becomes more familiar for targeting larger deals. It also eyes acquiring City National, a Los Angeles based bank, focusing on high net-worth clients, for further expansion.

The US market has become the focal point of RBC's global business strategy considering the fairly saturated Canadian market. RBC enjoys 3% of $40 billion fee pool in the US market. Increasing the market share up to 3.5% to 4% seems to be very much achievable target, cites Fleming while addressing an interview on company's market share in U.S. investment banking.

The Canadian banking giant has doubled its workforce since the financial crisis hiring bankers from Goldman Sachs, Citigroup, Morgan Stanley and Bank of America. Its US fleet has grown 42% to 2,700 compared to that in 2009.

RBC has been reported to earn 60% of its capital markets revenue and net income from the US market. However, its US capital market revenue appears twice of that generated from Canada.

RBC's net earning from the US capital market is just double compared to that generated from Canada. Major European banks have squeezed their US operations since financial crisis. RBC has grabbed the opportunity instead of intensifying presence in the super saturated Canadian market. The move has got success and RBC now plans to spread its dominance in the US capital market. 

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